Correlation Between Tyson Foods and Amazon

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

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

Diversification Opportunities for Tyson Foods and Amazon

0.16

Correlation Coefficient

Tyson Foods  Amazon

Average diversification

The 3 months correlation between Tyson and Amazon is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Amazon Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amazon Inc 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 Amazon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amazon Inc has no effect on the direction of Tyson Foods i.e., Tyson Foods and Amazon go up and down completely randomly.

Pair Corralation between Tyson Foods and Amazon

Assuming the 90 days trading horizon Tyson Foods is expected to under-perform the Amazon. In addition to that, Tyson Foods is 1.11 times more volatile than Amazon Inc. It trades about -0.1 of its total potential returns per unit of risk. Amazon Inc is currently generating about -0.07 per unit of volatility. If you would invest  6,620  in Amazon Inc on December 4, 2024 and sell it today you would lose (427.00) from holding Amazon Inc or give up 6.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.67%
Values	Daily Returns

Tyson Foods  vs.  Amazon Inc

Tyson Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Amazon Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amazon Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tyson Foods and Amazon

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

The idea behind Tyson Foods and Amazon Inc 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.