Correlation Between Tyson Foods and ASML Holding

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

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

Diversification Opportunities for Tyson Foods and ASML Holding

0.07

Correlation Coefficient

Tyson Foods  ASML Holding

Significant diversification

The 3 months correlation between Tyson and ASML is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV 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 ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of Tyson Foods i.e., Tyson Foods and ASML Holding go up and down completely randomly.

Pair Corralation between Tyson Foods and ASML Holding

Assuming the 90 days trading horizon Tyson Foods is expected to generate 0.51 times more return on investment than ASML Holding. However, Tyson Foods is 1.95 times less risky than ASML Holding. It trades about -0.03 of its potential returns per unit of risk. ASML Holding NV is currently generating about -0.04 per unit of risk. If you would invest  35,742  in Tyson Foods on December 21, 2024 and sell it today you would lose (966.00) from holding Tyson Foods or give up 2.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Tyson Foods  vs.  ASML Holding NV

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 somewhat strong basic indicators, Tyson Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

ASML Holding NV

Risk-Adjusted Performance

Very Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary 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 ASML Holding

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

The idea behind Tyson Foods and ASML Holding NV 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.