Correlation Between Microsoft Corp and Seneca Foods

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

Diversification Opportunities for Microsoft Corp and Seneca Foods

-0.38
  Correlation Coefficient

Very good diversification

The 3 months correlation between Microsoft and Seneca is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft Corp and Seneca Foods Cp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Seneca Foods Cp and Microsoft Corp 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 Microsoft Corp 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 Cp has no effect on the direction of Microsoft Corp i.e., Microsoft Corp and Seneca Foods go up and down completely randomly.

Pair Corralation between Microsoft Corp and Seneca Foods

Given the investment horizon of 90 days Microsoft Corp is expected to generate 2.37 times less return on investment than Seneca Foods. But when comparing it to its historical volatility, Microsoft Corp is 1.38 times less risky than Seneca Foods. It trades about 0.03 of its potential returns per unit of risk. Seneca Foods Cp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  4,217  in Seneca Foods Cp on August 31, 2022 and sell it today you would earn a total of  1,927  from holding Seneca Foods Cp or generate 45.7% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Microsoft Corp  vs.  Seneca Foods Cp

 Performance (%) 
       Timeline  
Microsoft Corp 
Microsoft Performance
0 of 100
Over the last 90 days Microsoft Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Microsoft Corp is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Microsoft Price Channel

Seneca Foods Cp 
Seneca Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Seneca Foods Cp are ranked lower than 8 (%) 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

Microsoft Corp and Seneca Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Microsoft Corp and Seneca Foods

The main advantage of trading using opposite Microsoft Corp and Seneca Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft Corp 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 Microsoft Corp and Seneca Foods Cp 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.

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