Correlation Between Tyson Foods and Pacific West

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

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

Diversification Opportunities for Tyson Foods and Pacific West

0.3

Correlation Coefficient

Tyson Foods  Pacific West

Weak diversification

The 3 months correlation between Tyson and Pacific is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Pacific West Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacific West Bancorp 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 Pacific West. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacific West Bancorp has no effect on the direction of Tyson Foods i.e., Tyson Foods and Pacific West go up and down completely randomly.

Pair Corralation between Tyson Foods and Pacific West

Considering the 90-day investment horizon Tyson Foods is expected to generate 0.54 times more return on investment than Pacific West. However, Tyson Foods is 1.87 times less risky than Pacific West. It trades about 0.07 of its potential returns per unit of risk. Pacific West Bancorp is currently generating about -0.05 per unit of risk. If you would invest  5,772  in Tyson Foods on December 19, 2024 and sell it today you would earn a total of  279.00  from holding Tyson Foods or generate 4.83% return on investment over 90 days.

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

Tyson Foods  vs.  Pacific West Bancorp

Tyson Foods

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 5 (%) 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.

Pacific West Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pacific West Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Tyson Foods and Pacific West

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

The idea behind Tyson Foods and Pacific West Bancorp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.