Correlation Between Tyson Foods and Universal Health

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

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

Diversification Opportunities for Tyson Foods and Universal Health

0.19

Correlation Coefficient

Tyson Foods  Universal Health

Average diversification

The 3 months correlation between Tyson and Universal is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Universal Health Services, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Health Ser 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 Universal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Health Ser has no effect on the direction of Tyson Foods i.e., Tyson Foods and Universal Health go up and down completely randomly.

Pair Corralation between Tyson Foods and Universal Health

Assuming the 90 days trading horizon Tyson Foods is expected to generate 1.18 times more return on investment than Universal Health. However, Tyson Foods is 1.18 times more volatile than Universal Health Services,. It trades about -0.03 of its potential returns per unit of risk. Universal Health Services, is currently generating about -0.14 per unit of risk. If you would invest  35,727  in Tyson Foods on December 25, 2024 and sell it today you would lose (951.00) from holding Tyson Foods or give up 2.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Tyson Foods  vs.  Universal Health Services,

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 somewhat strong basic indicators, Tyson Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Universal Health Ser

Risk-Adjusted Performance

Very Weak

Over the last 90 days Universal Health Services, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tyson Foods and Universal Health

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

The idea behind Tyson Foods and Universal Health Services, 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.