Correlation Between Tyson Foods and Hanover Insurance

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

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

Diversification Opportunities for Tyson Foods and Hanover Insurance

0.65

Correlation Coefficient

Tyson Foods  Hanover Insurance

Poor diversification

The 3 months correlation between Tyson and Hanover is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and The Hanover Insurance in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hanover Insurance 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 Hanover Insurance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hanover Insurance has no effect on the direction of Tyson Foods i.e., Tyson Foods and Hanover Insurance go up and down completely randomly.

Pair Corralation between Tyson Foods and Hanover Insurance

Assuming the 90 days trading horizon Tyson Foods is expected to generate 2.57 times less return on investment than Hanover Insurance. In addition to that, Tyson Foods is 1.22 times more volatile than The Hanover Insurance. It trades about 0.07 of its total potential returns per unit of risk. The Hanover Insurance is currently generating about 0.21 per unit of volatility. If you would invest  13,014  in The Hanover Insurance on September 3, 2024 and sell it today you would earn a total of  2,786  from holding The Hanover Insurance or generate 21.41% 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.  The Hanover Insurance

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.

Hanover Insurance

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Hanover Insurance are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hanover Insurance reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and Hanover Insurance

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

The idea behind Tyson Foods and The Hanover Insurance 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.

Check out your portfolio center.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.