Correlation Between Tyson Foods and Blackline

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

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

Diversification Opportunities for Tyson Foods and Blackline

0.79

Correlation Coefficient

Tyson Foods  Blackline

Poor diversification

The 3 months correlation between Tyson and Blackline is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Blackline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackline 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 are associated (or correlated) with Blackline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackline has no effect on the direction of Tyson Foods i.e., Tyson Foods and Blackline go up and down completely randomly.

Pair Corralation between Tyson Foods and Blackline

Assuming the 90 days trading horizon Tyson Foods is expected to under-perform the Blackline. But the stock apears to be less risky and, when comparing its historical volatility, Tyson Foods is 1.38 times less risky than Blackline. The stock trades about -0.47 of its potential returns per unit of risk. The Blackline is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  5,850  in Blackline on September 29, 2024 and sell it today you would earn a total of  0.00  from holding Blackline or generate 0.0% return on investment over 90 days.

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

Tyson Foods  vs.  Blackline

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.

Blackline

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Blackline are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Blackline reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and Blackline

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

The idea behind Tyson Foods and Blackline 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.