Correlation Between London Security and Tyson Foods

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

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

Diversification Opportunities for London Security and Tyson Foods

0.67

Correlation Coefficient

London Security  Tyson Foods

Poor diversification

The 3 months correlation between London and Tyson is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding London Security Plc and Tyson Foods Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods Cl and London Security 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 London Security Plc 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 Cl has no effect on the direction of London Security i.e., London Security and Tyson Foods go up and down completely randomly.

Pair Corralation between London Security and Tyson Foods

Assuming the 90 days trading horizon London Security is expected to generate 1.29 times less return on investment than Tyson Foods. In addition to that, London Security is 1.18 times more volatile than Tyson Foods Cl. It trades about 0.08 of its total potential returns per unit of risk. Tyson Foods Cl is currently generating about 0.12 per unit of volatility. If you would invest  5,660  in Tyson Foods Cl on December 28, 2024 and sell it today you would earn a total of  570.00  from holding Tyson Foods Cl or generate 10.07% return on investment over 90 days.

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

London Security Plc  vs.  Tyson Foods Cl

London Security Plc

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in London Security Plc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, London Security may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Tyson Foods Cl

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods Cl are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with London Security and Tyson Foods

The main advantage of trading using opposite London Security and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if London Security 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 London Security Plc and Tyson Foods Cl 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.