Correlation Between Tyson Foods and Hiscox

Can any of the company-specific risk be diversified away by investing in both Tyson Foods and Hiscox 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 Hiscox 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 Hiscox, you can compare the effects of market volatilities on Tyson Foods and Hiscox 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 Hiscox. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tyson Foods and Hiscox.

Diversification Opportunities for Tyson Foods and Hiscox

-0.31

Correlation Coefficient

Tyson Foods  Hiscox

Very good diversification

The 3 months correlation between Tyson and Hiscox is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods Cl and Hiscox in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hiscox 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 Hiscox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hiscox has no effect on the direction of Tyson Foods i.e., Tyson Foods and Hiscox go up and down completely randomly.

Pair Corralation between Tyson Foods and Hiscox

Assuming the 90 days trading horizon Tyson Foods Cl is expected to under-perform the Hiscox. But the stock apears to be less risky and, when comparing its historical volatility, Tyson Foods Cl is 1.07 times less risky than Hiscox. The stock trades about -0.04 of its potential returns per unit of risk. The Hiscox is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  111,000  in Hiscox on October 25, 2024 and sell it today you would lose (2,100) from holding Hiscox or give up 1.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tyson Foods Cl  vs.  Hiscox

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.

Hiscox

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hiscox has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Hiscox is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tyson Foods and Hiscox

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

The idea behind Tyson Foods Cl and Hiscox 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.