Correlation Between SM Investments and Tyson Foods

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

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

Diversification Opportunities for SM Investments and Tyson Foods

-0.26

Correlation Coefficient

SM Investments  Tyson Foods

Very good diversification

The 3 months correlation between SVTMF and Tyson is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding SM Investments and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and SM Investments 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 SM Investments 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 SM Investments i.e., SM Investments and Tyson Foods go up and down completely randomly.

Pair Corralation between SM Investments and Tyson Foods

Assuming the 90 days horizon SM Investments is expected to under-perform the Tyson Foods. In addition to that, SM Investments is 1.21 times more volatile than Tyson Foods. It trades about -0.2 of its total potential returns per unit of risk. Tyson Foods is currently generating about 0.07 per unit of volatility. If you would invest  5,772  in Tyson Foods on December 19, 2024 and sell it today you would earn a total of  279.00  from holding Tyson Foods or generate 4.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

SM Investments  vs.  Tyson Foods

SM Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days SM Investments has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Tyson Foods

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. 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 SM Investments and Tyson Foods

The main advantage of trading using opposite SM Investments and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SM Investments 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 SM Investments 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.