Correlation Between Tyson Foods and PacifiCorp

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

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

Diversification Opportunities for Tyson Foods and PacifiCorp

-0.42

Correlation Coefficient

Tyson Foods  PacifiCorp

Very good diversification

The 3 months correlation between Tyson and PacifiCorp is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and PacifiCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PacifiCorp 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 PacifiCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PacifiCorp has no effect on the direction of Tyson Foods i.e., Tyson Foods and PacifiCorp go up and down completely randomly.

Pair Corralation between Tyson Foods and PacifiCorp

Considering the 90-day investment horizon Tyson Foods is expected to generate 0.03 times more return on investment than PacifiCorp. However, Tyson Foods is 29.6 times less risky than PacifiCorp. It trades about 0.13 of its potential returns per unit of risk. PacifiCorp is currently generating about -0.17 per unit of risk. If you would invest  5,667  in Tyson Foods on December 29, 2024 and sell it today you would earn a total of  571.00  from holding Tyson Foods or generate 10.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	18.03%
Values	Daily Returns

Tyson Foods  vs.  PacifiCorp

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.

PacifiCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PacifiCorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Tyson Foods and PacifiCorp

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

The idea behind Tyson Foods and PacifiCorp 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.