Correlation Between Tyson Foods and Shenzhen Investment

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

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

Diversification Opportunities for Tyson Foods and Shenzhen Investment

-0.55

Correlation Coefficient

Tyson Foods  Shenzhen Investment

Excellent diversification

The 3 months correlation between Tyson and Shenzhen is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Shenzhen Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment 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 Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment has no effect on the direction of Tyson Foods i.e., Tyson Foods and Shenzhen Investment go up and down completely randomly.

Pair Corralation between Tyson Foods and Shenzhen Investment

Assuming the 90 days trading horizon Tyson Foods is expected to under-perform the Shenzhen Investment. But the stock apears to be less risky and, when comparing its historical volatility, Tyson Foods is 5.65 times less risky than Shenzhen Investment. The stock trades about -0.29 of its potential returns per unit of risk. The Shenzhen Investment Limited is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Shenzhen Investment Limited on October 11, 2024 and sell it today you would earn a total of  1.00  from holding Shenzhen Investment Limited or generate 10.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	94.44%
Values	Daily Returns

Tyson Foods  vs.  Shenzhen Investment Limited

Tyson Foods

Risk-Adjusted Performance

3 of 100

Modest

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Shenzhen Investment

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Shenzhen Investment Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Shenzhen Investment may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Tyson Foods and Shenzhen Investment

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

The idea behind Tyson Foods and Shenzhen Investment 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.