Correlation Between Tyson Foods and Tsingtao Brewery

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

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

Diversification Opportunities for Tyson Foods and Tsingtao Brewery

-0.62

Correlation Coefficient

Tyson Foods  Tsingtao Brewery

Excellent diversification

The 3 months correlation between Tyson and Tsingtao is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Tsingtao Brewery in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsingtao Brewery 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 Tsingtao Brewery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsingtao Brewery has no effect on the direction of Tyson Foods i.e., Tyson Foods and Tsingtao Brewery go up and down completely randomly.

Pair Corralation between Tyson Foods and Tsingtao Brewery

Assuming the 90 days trading horizon Tyson Foods is expected to generate 0.7 times more return on investment than Tsingtao Brewery. However, Tyson Foods is 1.42 times less risky than Tsingtao Brewery. It trades about 0.09 of its potential returns per unit of risk. Tsingtao Brewery is currently generating about 0.01 per unit of risk. If you would invest  5,231  in Tyson Foods on October 8, 2024 and sell it today you would earn a total of  461.00  from holding Tyson Foods or generate 8.81% return on investment over 90 days.

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

Tyson Foods  vs.  Tsingtao Brewery

Tyson Foods

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Tsingtao Brewery

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tsingtao Brewery are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound forward indicators, Tsingtao Brewery is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Tyson Foods and Tsingtao Brewery

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

The idea behind Tyson Foods and Tsingtao Brewery 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.