Correlation Between SENECA FOODS and RELIANCE STEEL
Can any of the company-specific risk be diversified away by investing in both SENECA FOODS and RELIANCE STEEL 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 RELIANCE STEEL 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 RELIANCE STEEL AL, you can compare the effects of market volatilities on SENECA FOODS and RELIANCE STEEL 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 RELIANCE STEEL. Check out your portfolio center. Please also check ongoing floating volatility patterns of SENECA FOODS and RELIANCE STEEL.
Diversification Opportunities for SENECA FOODS and RELIANCE STEEL
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SENECA and RELIANCE is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding SENECA FOODS A and RELIANCE STEEL AL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RELIANCE STEEL AL 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 RELIANCE STEEL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RELIANCE STEEL AL has no effect on the direction of SENECA FOODS i.e., SENECA FOODS and RELIANCE STEEL go up and down completely randomly.
Pair Corralation between SENECA FOODS and RELIANCE STEEL
Assuming the 90 days trading horizon SENECA FOODS A is expected to generate 1.38 times more return on investment than RELIANCE STEEL. However, SENECA FOODS is 1.38 times more volatile than RELIANCE STEEL AL. It trades about 0.11 of its potential returns per unit of risk. RELIANCE STEEL AL is currently generating about 0.02 per unit of risk. If you would invest 5,250 in SENECA FOODS A on September 19, 2024 and sell it today you would earn a total of 1,950 from holding SENECA FOODS A or generate 37.14% 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. RELIANCE STEEL AL
Performance |
| Timeline |
| SENECA FOODS A |
| RELIANCE STEEL AL |
SENECA FOODS and RELIANCE STEEL Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SENECA FOODS and RELIANCE STEEL
The main advantage of trading using opposite SENECA FOODS and RELIANCE STEEL positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SENECA FOODS position performs unexpectedly, RELIANCE STEEL 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 RELIANCE STEEL will offset losses from the drop in RELIANCE STEEL's long position.| SENECA FOODS vs. KENNAMETAL INC | SENECA FOODS vs. Gaztransport Technigaz SA | SENECA FOODS vs. COLUMBIA SPORTSWEAR | SENECA FOODS vs. PARKEN Sport Entertainment |
| RELIANCE STEEL vs. Apple Inc | RELIANCE STEEL vs. Apple Inc | RELIANCE STEEL vs. Apple Inc | RELIANCE STEEL vs. Apple Inc |
Check out your portfolio center.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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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