Correlation Between Coty and Tyson Foods
Can any of the company-specific risk be diversified away by investing in both Coty 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 Coty and Tyson Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coty Inc and Tyson Foods, you can compare the effects of market volatilities on Coty 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 Coty with a short position of Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Tyson Foods.
Diversification Opportunities for Coty and Tyson Foods
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Coty and Tyson is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Coty 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 Coty Inc 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 Coty i.e., Coty and Tyson Foods go up and down completely randomly.
Pair Corralation between Coty and Tyson Foods
Given the investment horizon of 90 days Coty Inc is expected to generate 1.31 times more return on investment than Tyson Foods. However, Coty is 1.31 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 -0.09 per unit of risk. If you would invest 686.00 in Coty Inc on November 3, 2024 and sell it today you would earn a total of 47.00 from holding Coty Inc or generate 6.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coty Inc vs. Tyson Foods
Performance |
| Timeline |
| Coty Inc |
| Tyson Foods |
Coty and Tyson Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coty and Tyson Foods
The main advantage of trading using opposite Coty and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty 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 Coty Inc 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.| Tyson Foods vs. Bunge Limited | Tyson Foods vs. Cal Maine Foods | Tyson Foods vs. Dole PLC | Tyson Foods vs. Adecoagro SA |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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