Correlation Between Tyson Foods and Exxon Mobil

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

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

Diversification Opportunities for Tyson Foods and Exxon Mobil

0.25

Correlation Coefficient

Tyson Foods  Exxon Mobil

Modest diversification

The 3 months correlation between Tyson and Exxon is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil 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 Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Tyson Foods i.e., Tyson Foods and Exxon Mobil go up and down completely randomly.

Pair Corralation between Tyson Foods and Exxon Mobil

Assuming the 90 days trading horizon Tyson Foods is expected to generate 1.21 times more return on investment than Exxon Mobil. However, Tyson Foods is 1.21 times more volatile than Exxon Mobil. It trades about 0.11 of its potential returns per unit of risk. Exxon Mobil is currently generating about 0.09 per unit of risk. If you would invest  33,738  in Tyson Foods on September 17, 2024 and sell it today you would earn a total of  3,558  from holding Tyson Foods or generate 10.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Tyson Foods  vs.  Exxon Mobil

Tyson Foods

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Exxon Mobil

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Exxon Mobil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Tyson Foods and Exxon Mobil

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

The idea behind Tyson Foods and Exxon Mobil 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.