Correlation Between Tyson Foods and Collins Foods

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

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

Diversification Opportunities for Tyson Foods and Collins Foods

-0.15

Correlation Coefficient

Tyson Foods  Collins Foods

Good diversification

The 3 months correlation between Tyson and Collins is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Collins Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collins Foods Limited 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 Collins Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collins Foods Limited has no effect on the direction of Tyson Foods i.e., Tyson Foods and Collins Foods go up and down completely randomly.

Pair Corralation between Tyson Foods and Collins Foods

Assuming the 90 days trading horizon Tyson Foods is expected to generate 1.19 times more return on investment than Collins Foods. However, Tyson Foods is 1.19 times more volatile than Collins Foods Limited. It trades about 0.33 of its potential returns per unit of risk. Collins Foods Limited is currently generating about 0.23 per unit of risk. If you would invest  5,352  in Tyson Foods on September 3, 2024 and sell it today you would earn a total of  784.00  from holding Tyson Foods or generate 14.65% return on investment over 90 days.

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

Tyson Foods  vs.  Collins Foods Limited

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 January 2025.

Collins Foods Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Collins Foods Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Collins Foods reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and Collins Foods

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

The idea behind Tyson Foods and Collins Foods Limited 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.