Correlation Between Clover Health and Tyson Foods

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

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

Diversification Opportunities for Clover Health and Tyson Foods

-0.48

Correlation Coefficient

Clover Health  Tyson Foods

Very good diversification

The 3 months correlation between Clover and Tyson is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Clover Health Investments, and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Clover Health 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 Clover Health Investments, 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 Clover Health i.e., Clover Health and Tyson Foods go up and down completely randomly.

Pair Corralation between Clover Health and Tyson Foods

Assuming the 90 days trading horizon Clover Health Investments, is expected to under-perform the Tyson Foods. In addition to that, Clover Health is 1.83 times more volatile than Tyson Foods. It trades about -0.12 of its total potential returns per unit of risk. Tyson Foods is currently generating about 0.08 per unit of volatility. If you would invest  34,034  in Tyson Foods on October 7, 2024 and sell it today you would earn a total of  1,786  from holding Tyson Foods or generate 5.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	92.11%
Values	Daily Returns

Clover Health Investments,  vs.  Tyson Foods

Clover Health Invest

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clover Health Investments, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Clover Health is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 weak basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Clover Health and Tyson Foods

The main advantage of trading using opposite Clover Health and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clover Health 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 Clover Health Investments, 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 Transaction History module to view history of all your transactions and understand their impact on performance.