Correlation Between Tyson Foods and Darden Restaurants

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

By analyzing existing cross correlation between Tyson Foods Cl and Darden Restaurants, you can compare the effects of market volatilities on Tyson Foods and Darden Restaurants 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 Tyson Foods with a short position of Darden Restaurants. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tyson Foods and Darden Restaurants.

Diversification Opportunities for Tyson Foods and Darden Restaurants

-0.4

Correlation Coefficient

Tyson Foods  Darden Restaurants

Very good diversification

The 3 months correlation between Tyson and Darden is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods Cl and Darden Restaurants in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Darden Restaurants and Tyson 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 Tyson Foods Cl are associated (or correlated) with Darden Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Darden Restaurants has no effect on the direction of Tyson Foods i.e., Tyson Foods and Darden Restaurants go up and down completely randomly.

Pair Corralation between Tyson Foods and Darden Restaurants

Assuming the 90 days trading horizon Tyson Foods Cl is expected to under-perform the Darden Restaurants. In addition to that, Tyson Foods is 1.1 times more volatile than Darden Restaurants. It trades about 0.0 of its total potential returns per unit of risk. Darden Restaurants is currently generating about 0.05 per unit of volatility. If you would invest  13,850  in Darden Restaurants on October 24, 2024 and sell it today you would earn a total of  4,647  from holding Darden Restaurants or generate 33.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.15%
Values	Daily Returns

Tyson Foods Cl  vs.  Darden Restaurants

Tyson Foods Cl

Risk-Adjusted Performance

0 of 100

Very Weak

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

Darden Restaurants

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Darden Restaurants are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Darden Restaurants unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and Darden Restaurants

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

The idea behind Tyson Foods Cl and Darden Restaurants 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 Valuation module to check real value of public entities based on technical and fundamental data.