Correlation Between Tyson Foods and Australian Agricultural

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

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

Diversification Opportunities for Tyson Foods and Australian Agricultural

0.68

Correlation Coefficient

Tyson Foods  Australian Agricultural

Poor diversification

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

Pair Corralation between Tyson Foods and Australian Agricultural

Considering the 90-day investment horizon Tyson Foods is expected to generate 1.14 times less return on investment than Australian Agricultural. But when comparing it to its historical volatility, Tyson Foods is 1.76 times less risky than Australian Agricultural. It trades about 0.13 of its potential returns per unit of risk. Australian Agricultural is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  86.00  in Australian Agricultural on December 29, 2024 and sell it today you would earn a total of  9.00  from holding Australian Agricultural or generate 10.47% return on investment over 90 days.

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

Tyson Foods  vs.  Australian Agricultural

Tyson Foods

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Australian Agricultural

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Australian Agricultural are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Australian Agricultural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tyson Foods and Australian Agricultural

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

The idea behind Tyson Foods and Australian Agricultural 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.