Correlation Between Tyson Foods and Mastercard Incorporated

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

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

Diversification Opportunities for Tyson Foods and Mastercard Incorporated

0.73

Correlation Coefficient

Tyson Foods  Mastercard Incorporated

Poor diversification

The 3 months correlation between Tyson and Mastercard is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Mastercard Incorporated in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mastercard Incorporated 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 Mastercard Incorporated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mastercard Incorporated has no effect on the direction of Tyson Foods i.e., Tyson Foods and Mastercard Incorporated go up and down completely randomly.

Pair Corralation between Tyson Foods and Mastercard Incorporated

Assuming the 90 days trading horizon Tyson Foods is expected to generate 1.93 times less return on investment than Mastercard Incorporated. In addition to that, Tyson Foods is 1.12 times more volatile than Mastercard Incorporated. It trades about 0.09 of its total potential returns per unit of risk. Mastercard Incorporated is currently generating about 0.19 per unit of volatility. If you would invest  8,848  in Mastercard Incorporated on September 17, 2024 and sell it today you would earn a total of  1,632  from holding Mastercard Incorporated or generate 18.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Tyson Foods  vs.  Mastercard Incorporated

Tyson Foods

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 6 (%) 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.

Mastercard Incorporated

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Mastercard Incorporated sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tyson Foods and Mastercard Incorporated

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

The idea behind Tyson Foods and Mastercard Incorporated 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.