Correlation Between Choice Hotels and Tyson Foods

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

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

Diversification Opportunities for Choice Hotels and Tyson Foods

0.74

Correlation Coefficient

Choice Hotels  Tyson Foods

Poor diversification

The 3 months correlation between Choice and Tyson is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Choice Hotels International and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Choice Hotels 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 Choice Hotels International 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 Choice Hotels i.e., Choice Hotels and Tyson Foods go up and down completely randomly.

Pair Corralation between Choice Hotels and Tyson Foods

Assuming the 90 days horizon Choice Hotels is expected to generate 1.11 times less return on investment than Tyson Foods. But when comparing it to its historical volatility, Choice Hotels International is 1.18 times less risky than Tyson Foods. It trades about 0.11 of its potential returns per unit of risk. Tyson Foods is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,316  in Tyson Foods on October 6, 2024 and sell it today you would earn a total of  376.00  from holding Tyson Foods or generate 7.07% return on investment over 90 days.

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

Choice Hotels International  vs.  Tyson Foods

Choice Hotels Intern

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Choice Hotels International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Choice Hotels reported solid returns over the last few months and may actually be approaching a breakup point.

Tyson Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Choice Hotels and Tyson Foods

The main advantage of trading using opposite Choice Hotels and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Choice Hotels 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 Choice Hotels International 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.