Correlation Between Tyson Foods and INFORMATION SVC

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

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

Diversification Opportunities for Tyson Foods and INFORMATION SVC

0.83

Correlation Coefficient

Tyson Foods  INFORMATION SVC

Very poor diversification

The 3 months correlation between Tyson and INFORMATION is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and INFORMATION SVC GRP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INFORMATION SVC GRP 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 INFORMATION SVC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INFORMATION SVC GRP has no effect on the direction of Tyson Foods i.e., Tyson Foods and INFORMATION SVC go up and down completely randomly.

Pair Corralation between Tyson Foods and INFORMATION SVC

Assuming the 90 days trading horizon Tyson Foods is expected to under-perform the INFORMATION SVC. But the stock apears to be less risky and, when comparing its historical volatility, Tyson Foods is 1.44 times less risky than INFORMATION SVC. The stock trades about -0.36 of its potential returns per unit of risk. The INFORMATION SVC GRP is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  334.00  in INFORMATION SVC GRP on September 25, 2024 and sell it today you would lose (10.00) from holding INFORMATION SVC GRP or give up 2.99% of portfolio value over 90 days.

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

Tyson Foods  vs.  INFORMATION SVC GRP

Tyson Foods

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 4 (%) 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.

INFORMATION SVC GRP

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in INFORMATION SVC GRP are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, INFORMATION SVC reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and INFORMATION SVC

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

The idea behind Tyson Foods and INFORMATION SVC GRP 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.