Correlation Between Freeport and Tyson Foods

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

By analyzing existing cross correlation between Freeport McMoRan 425 percent and Tyson Foods, you can compare the effects of market volatilities on Freeport and Tyson Foods 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 Freeport with a short position of Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freeport and Tyson Foods.

Diversification Opportunities for Freeport and Tyson Foods

0.31

Correlation Coefficient

Freeport  Tyson Foods

Weak diversification

The 3 months correlation between Freeport and Tyson is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Freeport McMoRan 425 percent and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Freeport 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 Freeport McMoRan 425 percent are associated (or correlated) with Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of Freeport i.e., Freeport and Tyson Foods go up and down completely randomly.

Pair Corralation between Freeport and Tyson Foods

Assuming the 90 days trading horizon Freeport McMoRan 425 percent is expected to generate 1.22 times more return on investment than Tyson Foods. However, Freeport is 1.22 times more volatile than Tyson Foods. It trades about -0.18 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.6 per unit of risk. If you would invest  9,709  in Freeport McMoRan 425 percent on October 6, 2024 and sell it today you would lose (346.00) from holding Freeport McMoRan 425 percent or give up 3.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.91%
Values	Daily Returns

Freeport McMoRan 425 percent  vs.  Tyson Foods

Freeport McMoRan 425

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeport McMoRan 425 percent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Freeport is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tyson Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Tyson Foods is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Freeport and Tyson Foods

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

The idea behind Freeport McMoRan 425 percent and Tyson Foods 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.