Correlation Between Seneca Foods and Central Garden

Can any of the company-specific risk be diversified away by investing in both Seneca Foods and Central Garden 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 Central Garden into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Seneca Foods Corp and Central Garden Pet, you can compare the effects of market volatilities on Seneca Foods and Central Garden 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 Central Garden. Check out your portfolio center. Please also check ongoing floating volatility patterns of Seneca Foods and Central Garden.

Diversification Opportunities for Seneca Foods and Central Garden

-0.09

Correlation Coefficient

Seneca Foods  Central Garden

Good diversification

The 3 months correlation between Seneca and Central is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Seneca Foods Corp and Central Garden Pet in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Central Garden Pet 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 Corp are associated (or correlated) with Central Garden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Central Garden Pet has no effect on the direction of Seneca Foods i.e., Seneca Foods and Central Garden go up and down completely randomly.

Pair Corralation between Seneca Foods and Central Garden

Assuming the 90 days horizon Seneca Foods is expected to generate 1.85 times less return on investment than Central Garden. In addition to that, Seneca Foods is 2.27 times more volatile than Central Garden Pet. It trades about 0.06 of its total potential returns per unit of risk. Central Garden Pet is currently generating about 0.27 per unit of volatility. If you would invest  3,330  in Central Garden Pet on August 10, 2024 and sell it today you would earn a total of  340.00  from holding Central Garden Pet or generate 10.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.64%
Values	Daily Returns

Seneca Foods Corp  vs.  Central Garden Pet

Seneca Foods Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile technical and fundamental indicators, Seneca Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Central Garden Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Central Garden Pet has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Central Garden is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Seneca Foods and Central Garden

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

The idea behind Seneca Foods Corp and Central Garden Pet 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.