Correlation Between Universal Stainless and Tyson Foods

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

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

Diversification Opportunities for Universal Stainless and Tyson Foods

0.08

Correlation Coefficient

Universal Stainless  Tyson Foods

Significant diversification

The 3 months correlation between Universal and Tyson is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Universal Stainless Alloy and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Universal Stainless 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 Universal Stainless Alloy 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 Universal Stainless i.e., Universal Stainless and Tyson Foods go up and down completely randomly.

Pair Corralation between Universal Stainless and Tyson Foods

Given the investment horizon of 90 days Universal Stainless Alloy is expected to generate 0.29 times more return on investment than Tyson Foods. However, Universal Stainless Alloy is 3.43 times less risky than Tyson Foods. It trades about 0.31 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.11 per unit of risk. If you would invest  4,400  in Universal Stainless Alloy on October 26, 2024 and sell it today you would earn a total of  99.00  from holding Universal Stainless Alloy or generate 2.25% return on investment over 90 days.

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

Universal Stainless Alloy  vs.  Tyson Foods

Universal Stainless Alloy

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Stainless Alloy are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Universal Stainless is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Tyson Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Universal Stainless and Tyson Foods

The main advantage of trading using opposite Universal Stainless and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Universal Stainless 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 Universal Stainless Alloy 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.