Correlation Between TYSON FOODS and ASPEN TECHINC

Can any of the company-specific risk be diversified away by investing in both TYSON FOODS and ASPEN TECHINC 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 ASPEN TECHINC 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 ASPEN TECHINC DL, you can compare the effects of market volatilities on TYSON FOODS and ASPEN TECHINC 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 ASPEN TECHINC. Check out your portfolio center. Please also check ongoing floating volatility patterns of TYSON FOODS and ASPEN TECHINC.

Diversification Opportunities for TYSON FOODS and ASPEN TECHINC

0.32

Correlation Coefficient

TYSON FOODS  ASPEN TECHINC

Weak diversification

The 3 months correlation between TYSON and ASPEN is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding TYSON FOODS A and ASPEN TECHINC DL in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASPEN TECHINC DL 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 ASPEN TECHINC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASPEN TECHINC DL has no effect on the direction of TYSON FOODS i.e., TYSON FOODS and ASPEN TECHINC go up and down completely randomly.

Pair Corralation between TYSON FOODS and ASPEN TECHINC

Assuming the 90 days trading horizon TYSON FOODS is expected to generate 7.78 times less return on investment than ASPEN TECHINC. But when comparing it to its historical volatility, TYSON FOODS A is 1.43 times less risky than ASPEN TECHINC. It trades about 0.01 of its potential returns per unit of risk. ASPEN TECHINC DL is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  18,283  in ASPEN TECHINC DL on October 24, 2024 and sell it today you would earn a total of  5,917  from holding ASPEN TECHINC DL or generate 32.36% return on investment over 90 days.

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

TYSON FOODS A   vs.  ASPEN TECHINC DL

TYSON FOODS A

Risk-Adjusted Performance

0 of 100

Very Weak

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 newest stock price tumult, may contribute to shorter-term losses for the shareholders.

ASPEN TECHINC DL

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ASPEN TECHINC DL are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ASPEN TECHINC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TYSON FOODS and ASPEN TECHINC

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

The idea behind TYSON FOODS A and ASPEN TECHINC DL 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.