Correlation Between MOWI ASA and Tyson Foods

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

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

Diversification Opportunities for MOWI ASA and Tyson Foods

0.82

Correlation Coefficient

MOWI ASA  Tyson Foods

Very poor diversification

The 3 months correlation between MOWI and Tyson is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MOWI ASA SPADR and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and MOWI ASA 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 MOWI ASA SPADR 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 MOWI ASA i.e., MOWI ASA and Tyson Foods go up and down completely randomly.

Pair Corralation between MOWI ASA and Tyson Foods

Assuming the 90 days trading horizon MOWI ASA SPADR is expected to generate 0.89 times more return on investment than Tyson Foods. However, MOWI ASA SPADR is 1.13 times less risky than Tyson Foods. It trades about -0.2 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.39 per unit of risk. If you would invest  1,700  in MOWI ASA SPADR on September 23, 2024 and sell it today you would lose (80.00) from holding MOWI ASA SPADR or give up 4.71% of portfolio value over 90 days.

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

MOWI ASA SPADR  vs.  Tyson Foods

MOWI ASA SPADR

Risk-Adjusted Performance

4 of 100

Insignificant

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

Tyson Foods

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 3 (%) 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 MOWI ASA and Tyson Foods

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

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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.