Correlation Between Tyson Foods and AG Mortgage

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

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

Diversification Opportunities for Tyson Foods and AG Mortgage

0.12

Correlation Coefficient

Tyson Foods  AG Mortgage

Average diversification

The 3 months correlation between Tyson and MITN is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and AG Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AG Mortgage 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 AG Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AG Mortgage Investment has no effect on the direction of Tyson Foods i.e., Tyson Foods and AG Mortgage go up and down completely randomly.

Pair Corralation between Tyson Foods and AG Mortgage

Considering the 90-day investment horizon Tyson Foods is expected to generate 6.38 times more return on investment than AG Mortgage. However, Tyson Foods is 6.38 times more volatile than AG Mortgage Investment. It trades about 0.05 of its potential returns per unit of risk. AG Mortgage Investment is currently generating about 0.19 per unit of risk. If you would invest  5,848  in Tyson Foods on December 18, 2024 and sell it today you would earn a total of  211.00  from holding Tyson Foods or generate 3.61% return on investment over 90 days.

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

Tyson Foods  vs.  AG Mortgage Investment

Tyson Foods

Risk-Adjusted Performance

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. 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.

AG Mortgage Investment

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AG Mortgage Investment are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, AG Mortgage is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Tyson Foods and AG Mortgage

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

The idea behind Tyson Foods and AG Mortgage Investment 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.