Correlation Between Nates Food and Tyson Foods

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

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

Diversification Opportunities for Nates Food and Tyson Foods

0.09

Correlation Coefficient

Nates Food  Tyson Foods

Significant diversification

The 3 months correlation between Nates and Tyson is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nates Food Co and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Nates Food 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 Nates Food 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 Nates Food i.e., Nates Food and Tyson Foods go up and down completely randomly.

Pair Corralation between Nates Food and Tyson Foods

Given the investment horizon of 90 days Nates Food Co is expected to generate 108.88 times more return on investment than Tyson Foods. However, Nates Food is 108.88 times more volatile than Tyson Foods. It trades about 0.17 of its potential returns per unit of risk. Tyson Foods is currently generating about 0.0 per unit of risk. If you would invest  0.05  in Nates Food Co on October 23, 2024 and sell it today you would lose (0.04) from holding Nates Food Co or give up 80.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Nates Food Co  vs.  Tyson Foods

Nates Food

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Nates Food Co are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile primary indicators, Nates Food exhibited solid returns over the last few months and may actually be approaching a breakup point.

Tyson Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tyson Foods is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nates Food and Tyson Foods

The main advantage of trading using opposite Nates Food and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nates Food 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 Nates Food 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .