Correlation Between Tyson Foods and Gear Energy

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

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

Diversification Opportunities for Tyson Foods and Gear Energy

-0.32

Correlation Coefficient

Tyson Foods  Gear Energy

Very good diversification

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

Pair Corralation between Tyson Foods and Gear Energy

Assuming the 90 days trading horizon Tyson Foods is expected to generate 0.28 times more return on investment than Gear Energy. However, Tyson Foods is 3.61 times less risky than Gear Energy. It trades about -0.55 of its potential returns per unit of risk. Gear Energy is currently generating about -0.2 per unit of risk. If you would invest  6,145  in Tyson Foods on October 4, 2024 and sell it today you would lose (626.00) from holding Tyson Foods or give up 10.19% of portfolio value over 90 days.

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

Tyson Foods  vs.  Gear Energy

Tyson Foods

Risk-Adjusted Performance

5 of 100

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. Despite nearly fragile basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Gear Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Tyson Foods and Gear Energy

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

The idea behind Tyson Foods and Gear Energy 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.