Correlation Between Tyson Foods and General Dynamics

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

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

Diversification Opportunities for Tyson Foods and General Dynamics

0.13

Correlation Coefficient

Tyson Foods  General Dynamics

Average diversification

The 3 months correlation between Tyson and General is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and General Dynamics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Dynamics 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 General Dynamics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Dynamics has no effect on the direction of Tyson Foods i.e., Tyson Foods and General Dynamics go up and down completely randomly.

Pair Corralation between Tyson Foods and General Dynamics

Assuming the 90 days trading horizon Tyson Foods is expected to generate 1.05 times more return on investment than General Dynamics. However, Tyson Foods is 1.05 times more volatile than General Dynamics. It trades about -0.1 of its potential returns per unit of risk. General Dynamics is currently generating about -0.14 per unit of risk. If you would invest  38,454  in Tyson Foods on December 5, 2024 and sell it today you would lose (3,678) from holding Tyson Foods or give up 9.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.23%
Values	Daily Returns

Tyson Foods  vs.  General Dynamics

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.

General Dynamics

Risk-Adjusted Performance

Very Weak

Over the last 90 days General Dynamics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Tyson Foods and General Dynamics

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

The idea behind Tyson Foods and General Dynamics 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.