Correlation Between Corteva and Tyson Foods

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

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

Diversification Opportunities for Corteva and Tyson Foods

0.87

Correlation Coefficient

Corteva  Tyson Foods

Very poor diversification

The 3 months correlation between Corteva and Tyson is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Corteva and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Corteva 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 Corteva are associated (or correlated) with Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of Corteva i.e., Corteva and Tyson Foods go up and down completely randomly.

Pair Corralation between Corteva and Tyson Foods

Assuming the 90 days trading horizon Corteva is expected to generate 0.64 times more return on investment than Tyson Foods. However, Corteva is 1.56 times less risky than Tyson Foods. It trades about -0.22 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.24 per unit of risk. If you would invest  9,198  in Corteva on October 8, 2024 and sell it today you would lose (378.00) from holding Corteva or give up 4.11% of portfolio value over 90 days.

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

Corteva  vs.  Tyson Foods

Corteva

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Corteva are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Corteva sustained solid returns over the last few months and may actually be approaching a breakup point.

Tyson Foods

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Corteva and Tyson Foods

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

The idea behind Corteva and Tyson Foods 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.