Correlation Between Titan Machinery and Tyson Foods

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

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

Diversification Opportunities for Titan Machinery and Tyson Foods

0.49

Correlation Coefficient

Titan Machinery  Tyson Foods

Very weak diversification

The 3 months correlation between Titan and Tyson is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Titan Machinery and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Titan Machinery 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 Titan Machinery are associated (or correlated) with Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of Titan Machinery i.e., Titan Machinery and Tyson Foods go up and down completely randomly.

Pair Corralation between Titan Machinery and Tyson Foods

Given the investment horizon of 90 days Titan Machinery is expected to generate 2.16 times more return on investment than Tyson Foods. However, Titan Machinery is 2.16 times more volatile than Tyson Foods. It trades about 0.04 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.07 per unit of risk. If you would invest  1,397  in Titan Machinery on October 20, 2024 and sell it today you would earn a total of  124.00  from holding Titan Machinery or generate 8.88% return on investment over 90 days.

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

Titan Machinery  vs.  Tyson Foods

Titan Machinery

Risk-Adjusted Performance

2 of 100

Weak

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

Tyson Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Tyson Foods is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Titan Machinery and Tyson Foods

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

The idea behind Titan Machinery and Tyson Foods 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.