Correlation Between SENECA FOODS and Vulcan Energy

Can any of the company-specific risk be diversified away by investing in both SENECA FOODS and Vulcan Energy 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 Vulcan Energy 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 Vulcan Energy Resources, you can compare the effects of market volatilities on SENECA FOODS and Vulcan Energy 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 Vulcan Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS and Vulcan Energy.

Diversification Opportunities for SENECA FOODS and Vulcan Energy

0.75

Correlation Coefficient

SENECA FOODS  Vulcan Energy

Poor diversification

The 3 months correlation between SENECA and Vulcan is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and Vulcan Energy Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Energy Resources 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 Vulcan Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Energy Resources has no effect on the direction of SENECA FOODS i.e., SENECA FOODS and Vulcan Energy go up and down completely randomly.

Pair Corralation between SENECA FOODS and Vulcan Energy

Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 0.41 times more return on investment than Vulcan Energy. However, SENECA FOODS A is 2.46 times less risky than Vulcan Energy. It trades about 0.21 of its potential returns per unit of risk. Vulcan Energy Resources is currently generating about 0.08 per unit of risk. If you would invest  5,450  in SENECA FOODS A on September 28, 2024 and sell it today you would earn a total of  1,650  from holding SENECA FOODS A or generate 30.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.77%
Values	Daily Returns

SENECA FOODS A  vs.  Vulcan Energy Resources

SENECA FOODS A

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SENECA FOODS A are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, SENECA FOODS exhibited solid returns over the last few months and may actually be approaching a breakup point.

Vulcan Energy Resources

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Energy Resources are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile essential indicators, Vulcan Energy unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SENECA FOODS and Vulcan Energy

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

The idea behind SENECA FOODS A and Vulcan Energy Resources 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.