Correlation Between ETFS Coffee and TYSON FOODS

Can any of the company-specific risk be diversified away by investing in both ETFS Coffee 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 ETFS Coffee and TYSON FOODS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ETFS Coffee ETC and TYSON FOODS A , you can compare the effects of market volatilities on ETFS Coffee 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 ETFS Coffee with a short position of TYSON FOODS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ETFS Coffee and TYSON FOODS.

Diversification Opportunities for ETFS Coffee and TYSON FOODS

0.72

Correlation Coefficient

ETFS Coffee  TYSON FOODS

Poor diversification

The 3 months correlation between ETFS and TYSON is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding ETFS Coffee ETC and TYSON FOODS A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TYSON FOODS A and ETFS Coffee 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 ETFS Coffee ETC 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 A has no effect on the direction of ETFS Coffee i.e., ETFS Coffee and TYSON FOODS go up and down completely randomly.

Pair Corralation between ETFS Coffee and TYSON FOODS

Assuming the 90 days trading horizon ETFS Coffee ETC is expected to generate 3.41 times more return on investment than TYSON FOODS. However, ETFS Coffee is 3.41 times more volatile than TYSON FOODS A . It trades about 0.21 of its potential returns per unit of risk. TYSON FOODS A is currently generating about -0.64 per unit of risk. If you would invest  4,696  in ETFS Coffee ETC on October 4, 2024 and sell it today you would earn a total of  485.00  from holding ETFS Coffee ETC or generate 10.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.74%
Values	Daily Returns

ETFS Coffee ETC  vs.  TYSON FOODS A

ETFS Coffee ETC

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ETFS Coffee ETC are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ETFS Coffee reported solid returns over the last few months and may actually be approaching a breakup point.

TYSON FOODS A

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TYSON FOODS A are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, TYSON FOODS may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with ETFS Coffee and TYSON FOODS

The main advantage of trading using opposite ETFS Coffee and TYSON FOODS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ETFS Coffee 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's long position.

The idea behind ETFS Coffee ETC and TYSON FOODS A 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.