Correlation Between SENECA FOODS and SOLSTAD OFFSHORE

Can any of the company-specific risk be diversified away by investing in both SENECA FOODS and SOLSTAD OFFSHORE 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 and SOLSTAD OFFSHORE 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 SOLSTAD OFFSHORE NK, you can compare the effects of market volatilities on SENECA FOODS and SOLSTAD OFFSHORE 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 with a short position of SOLSTAD OFFSHORE. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS and SOLSTAD OFFSHORE.

Diversification Opportunities for SENECA FOODS and SOLSTAD OFFSHORE

0.7

Correlation Coefficient

SENECA FOODS  SOLSTAD OFFSHORE

Poor diversification

The 3 months correlation between SENECA and SOLSTAD is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and SOLSTAD OFFSHORE NK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SOLSTAD OFFSHORE and SENECA FOODS 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 SOLSTAD OFFSHORE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SOLSTAD OFFSHORE has no effect on the direction of SENECA FOODS i.e., SENECA FOODS and SOLSTAD OFFSHORE go up and down completely randomly.

Pair Corralation between SENECA FOODS and SOLSTAD OFFSHORE

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 0.7 times more return on investment than SOLSTAD OFFSHORE. However, SENECA FOODS A is 1.42 times less risky than SOLSTAD OFFSHORE. It trades about 0.17 of its potential returns per unit of risk. SOLSTAD OFFSHORE NK is currently generating about 0.04 per unit of risk. If you would invest  5,500  in SENECA FOODS A on September 20, 2024 and sell it today you would earn a total of  1,650  from holding SENECA FOODS A or generate 30.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

SENECA FOODS A  vs.  SOLSTAD OFFSHORE NK

SENECA FOODS A

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, SENECA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

SOLSTAD OFFSHORE

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SOLSTAD OFFSHORE NK are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SOLSTAD OFFSHORE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with SENECA FOODS and SOLSTAD OFFSHORE

The main advantage of trading using opposite SENECA FOODS and SOLSTAD OFFSHORE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SENECA FOODS position performs unexpectedly, SOLSTAD OFFSHORE 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 SOLSTAD OFFSHORE will offset losses from the drop in SOLSTAD OFFSHORE's long position.

The idea behind SENECA FOODS A and SOLSTAD OFFSHORE NK 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.