Correlation Between Tyson Foods and ConocoPhillips

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

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

Diversification Opportunities for Tyson Foods and ConocoPhillips

0.3

Correlation Coefficient

Tyson Foods  ConocoPhillips

Weak diversification

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

Pair Corralation between Tyson Foods and ConocoPhillips

Assuming the 90 days trading horizon Tyson Foods is expected to generate 0.98 times more return on investment than ConocoPhillips. However, Tyson Foods is 1.02 times less risky than ConocoPhillips. It trades about 0.06 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.01 per unit of risk. If you would invest  32,256  in Tyson Foods on October 10, 2024 and sell it today you would earn a total of  1,944  from holding Tyson Foods or generate 6.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.92%
Values	Daily Returns

Tyson Foods  vs.  ConocoPhillips

Tyson Foods

Risk-Adjusted Performance

5 of 100

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. Despite somewhat weak basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ConocoPhillips is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tyson Foods and ConocoPhillips

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

The idea behind Tyson Foods and ConocoPhillips 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.