Correlation Between Globex Mining and Tyson Foods

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

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

Diversification Opportunities for Globex Mining and Tyson Foods

0.21

Correlation Coefficient

Globex Mining  Tyson Foods

Modest diversification

The 3 months correlation between Globex and Tyson is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Globex Mining Enterprises and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Globex Mining 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 Globex Mining Enterprises 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 Globex Mining i.e., Globex Mining and Tyson Foods go up and down completely randomly.

Pair Corralation between Globex Mining and Tyson Foods

Assuming the 90 days trading horizon Globex Mining Enterprises is expected to generate 1.48 times more return on investment than Tyson Foods. However, Globex Mining is 1.48 times more volatile than Tyson Foods. It trades about 0.21 of its potential returns per unit of risk. Tyson Foods is currently generating about 0.02 per unit of risk. If you would invest  76.00  in Globex Mining Enterprises on December 22, 2024 and sell it today you would earn a total of  26.00  from holding Globex Mining Enterprises or generate 34.21% return on investment over 90 days.

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

Globex Mining Enterprises  vs.  Tyson Foods

Globex Mining Enterprises

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Globex Mining Enterprises are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Globex Mining unveiled solid returns over the last few months and may actually be approaching a breakup point.

Tyson Foods

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 1 (%) 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 newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Globex Mining and Tyson Foods

The main advantage of trading using opposite Globex Mining and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Globex Mining 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 Globex Mining Enterprises 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.