Correlation Between TYSON FOODS and InterContinental

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

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

Diversification Opportunities for TYSON FOODS and InterContinental

0.82

Correlation Coefficient

TYSON FOODS  InterContinental

Very poor diversification

The 3 months correlation between TYSON and InterContinental is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding TYSON FOODS A and InterContinental Hotels Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InterContinental Hotels and TYSON FOODS 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 TYSON FOODS A are associated (or correlated) with InterContinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InterContinental Hotels has no effect on the direction of TYSON FOODS i.e., TYSON FOODS and InterContinental go up and down completely randomly.

Pair Corralation between TYSON FOODS and InterContinental

Assuming the 90 days trading horizon TYSON FOODS is expected to generate 3.55 times less return on investment than InterContinental. In addition to that, TYSON FOODS is 1.01 times more volatile than InterContinental Hotels Group. It trades about 0.06 of its total potential returns per unit of risk. InterContinental Hotels Group is currently generating about 0.22 per unit of volatility. If you would invest  9,950  in InterContinental Hotels Group on October 5, 2024 and sell it today you would earn a total of  2,050  from holding InterContinental Hotels Group or generate 20.6% return on investment over 90 days.

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

TYSON FOODS A   vs.  InterContinental Hotels Group

TYSON FOODS A

Risk-Adjusted Performance

0 of 100

Modest

Over the last 90 days TYSON FOODS A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, TYSON FOODS is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

InterContinental Hotels

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days InterContinental Hotels Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, InterContinental reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TYSON FOODS and InterContinental

The main advantage of trading using opposite TYSON FOODS and InterContinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TYSON FOODS position performs unexpectedly, InterContinental 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 InterContinental will offset losses from the drop in InterContinental's long position.

The idea behind TYSON FOODS A and InterContinental Hotels Group 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.