Correlation Between Fast Retailing and Tyson Foods

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

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

Diversification Opportunities for Fast Retailing and Tyson Foods

-0.33

Correlation Coefficient

Fast Retailing  Tyson Foods

Very good diversification

The 3 months correlation between Fast and Tyson is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Fast Retailing 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 Fast Retailing Co 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 Fast Retailing i.e., Fast Retailing and Tyson Foods go up and down completely randomly.

Pair Corralation between Fast Retailing and Tyson Foods

Assuming the 90 days trading horizon Fast Retailing Co is expected to under-perform the Tyson Foods. In addition to that, Fast Retailing is 1.0 times more volatile than Tyson Foods. It trades about -0.11 of its total potential returns per unit of risk. Tyson Foods is currently generating about 0.05 per unit of volatility. If you would invest  5,474  in Tyson Foods on December 28, 2024 and sell it today you would earn a total of  263.00  from holding Tyson Foods or generate 4.8% return on investment over 90 days.

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

Fast Retailing Co  vs.  Tyson Foods

Fast Retailing

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fast Retailing Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Tyson Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Tyson Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Fast Retailing and Tyson Foods

The main advantage of trading using opposite Fast Retailing and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing 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 Fast Retailing Co 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.

Check out your portfolio center.

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 Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.