Correlation Between Tyson Foods and General Motors

Can any of the company-specific risk be diversified away by investing in both Tyson Foods and General Motors 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 Motors 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 Motors, you can compare the effects of market volatilities on Tyson Foods and General Motors 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 Motors. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tyson Foods and General Motors.

Diversification Opportunities for Tyson Foods and General Motors

0.63

Correlation Coefficient

Tyson Foods  General Motors

Poor diversification

The 3 months correlation between Tyson and General is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and General Motors in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Motors 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 Motors. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Motors has no effect on the direction of Tyson Foods i.e., Tyson Foods and General Motors go up and down completely randomly.

Pair Corralation between Tyson Foods and General Motors

Assuming the 90 days trading horizon Tyson Foods is expected to generate 0.39 times more return on investment than General Motors. However, Tyson Foods is 2.57 times less risky than General Motors. It trades about 0.03 of its potential returns per unit of risk. General Motors is currently generating about -0.03 per unit of risk. If you would invest  37,117  in Tyson Foods on September 17, 2024 and sell it today you would earn a total of  179.00  from holding Tyson Foods or generate 0.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.0%
Values	Daily Returns

Tyson Foods  vs.  General Motors

Tyson Foods

Risk-Adjusted Performance

8 of 100

OK

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.

General Motors

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Motors are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain fundamental indicators, General Motors sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and General Motors

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

The idea behind Tyson Foods and General Motors 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.