Correlation Between GM and Seneca Foods

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Can any of the company-specific risk be diversified away by investing in both GM and Seneca Foods 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 GM and Seneca Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Motors and Seneca Foods Corp, you can compare the effects of market volatilities on GM and Seneca Foods 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 GM with a short position of Seneca Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of GM and Seneca Foods.

Diversification Opportunities for GM and Seneca Foods

0.26
  Correlation Coefficient

Modest diversification

The 3 months correlation between GM and Seneca is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding General Motors and Seneca Foods Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seneca Foods Corp and GM 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 General Motors are associated (or correlated) with Seneca Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Seneca Foods Corp has no effect on the direction of GM i.e., GM and Seneca Foods go up and down completely randomly.

Pair Corralation between GM and Seneca Foods

Allowing for the 90-day total investment horizon GM is expected to generate 2.11 times less return on investment than Seneca Foods. But when comparing it to its historical volatility, General Motors is 1.2 times less risky than Seneca Foods. It trades about 0.09 of its potential returns per unit of risk. Seneca Foods Corp is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  6,207  in Seneca Foods Corp on September 3, 2022 and sell it today you would earn a total of  499.00  from holding Seneca Foods Corp or generate 8.04% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

General Motors  vs.  Seneca Foods Corp

 Performance (%) 
       Timeline  
General Motors 
GM Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady primary indicators, GM is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

GM Price Channel

Seneca Foods Corp 
Seneca Performance
12 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Seneca Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Seneca Price Channel

GM and Seneca Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with GM and Seneca Foods

The main advantage of trading using opposite GM and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GM position performs unexpectedly, Seneca Foods 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 Seneca Foods will offset losses from the drop in Seneca Foods' long position.
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The idea behind General Motors and Seneca Foods Corp 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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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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