Correlation Between SENECA FOODS-A and Palo Alto

Can any of the company-specific risk be diversified away by investing in both SENECA FOODS-A and Palo Alto at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining SENECA FOODS-A and Palo Alto into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between SENECA FOODS A and Palo Alto Networks, you can compare the effects of market volatilities on SENECA FOODS-A and Palo Alto and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in SENECA FOODS-A with a short position of Palo Alto. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS-A and Palo Alto.

Diversification Opportunities for SENECA FOODS-A and Palo Alto

0.79

Correlation Coefficient

SENECA FOODS-A  Palo Alto

Poor diversification

The 3 months correlation between SENECA and Palo is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and Palo Alto Networks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palo Alto Networks and SENECA FOODS-A is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on SENECA FOODS A are associated (or correlated) with Palo Alto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palo Alto Networks has no effect on the direction of SENECA FOODS-A i.e., SENECA FOODS-A and Palo Alto go up and down completely randomly.

Pair Corralation between SENECA FOODS-A and Palo Alto

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 1.29 times more return on investment than Palo Alto. However, SENECA FOODS-A is 1.29 times more volatile than Palo Alto Networks. It trades about 0.28 of its potential returns per unit of risk. Palo Alto Networks is currently generating about 0.22 per unit of risk. If you would invest  5,500  in SENECA FOODS A on September 1, 2024 and sell it today you would earn a total of  950.00  from holding SENECA FOODS A or generate 17.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

SENECA FOODS A  vs.  Palo Alto Networks

SENECA FOODS A

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SENECA FOODS-A exhibited solid returns over the last few months and may actually be approaching a breakup point.

Palo Alto Networks

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palo Alto Networks are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Palo Alto reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SENECA FOODS-A and Palo Alto

The main advantage of trading using opposite SENECA FOODS-A and Palo Alto positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SENECA FOODS-A position performs unexpectedly, Palo Alto can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Palo Alto will offset losses from the drop in Palo Alto's long position.

The idea behind SENECA FOODS A and Palo Alto Networks pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.