Correlation Between Tyson Foods and Amazon

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

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

Diversification Opportunities for Tyson Foods and Amazon

0.68

Correlation Coefficient

Tyson Foods  Amazon

Poor diversification

The 3 months correlation between Tyson and Amazon is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Tyson Foods i.e., Tyson Foods and Amazon go up and down completely randomly.

Pair Corralation between Tyson Foods and Amazon

Assuming the 90 days trading horizon Tyson Foods is expected to generate 36.03 times less return on investment than Amazon. But when comparing it to its historical volatility, Tyson Foods is 1.1 times less risky than Amazon. It trades about 0.0 of its potential returns per unit of risk. Amazon Inc is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  8,130  in Amazon Inc on September 30, 2024 and sell it today you would earn a total of  13,510  from holding Amazon Inc or generate 166.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Tyson Foods  vs.  Amazon Inc

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.

Amazon Inc

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Amazon Inc are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Amazon reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and Amazon

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

The idea behind Tyson Foods and Amazon Inc 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.