Correlation Between Honeywell International and Tyson Foods
Can any of the company-specific risk be diversified away by investing in both Honeywell International 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 Honeywell International and Tyson Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Honeywell International and Tyson Foods, you can compare the effects of market volatilities on Honeywell International 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 Honeywell International with a short position of Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Honeywell International and Tyson Foods.
Diversification Opportunities for Honeywell International and Tyson Foods
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Honeywell and Tyson is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Honeywell International and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Honeywell International 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 Honeywell International 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 Honeywell International i.e., Honeywell International and Tyson Foods go up and down completely randomly.
Pair Corralation between Honeywell International and Tyson Foods
Assuming the 90 days trading horizon Honeywell International is expected to generate 3.86 times less return on investment than Tyson Foods. But when comparing it to its historical volatility, Honeywell International is 1.02 times less risky than Tyson Foods. It trades about 0.07 of its potential returns per unit of risk. Tyson Foods is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 36,266 in Tyson Foods on September 13, 2024 and sell it today you would earn a total of 2,188 from holding Tyson Foods or generate 6.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 85.0% |
| Values | Daily Returns |
Honeywell International vs. Tyson Foods
Performance |
| Timeline |
| Honeywell International |
| Tyson Foods |
Honeywell International and Tyson Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Honeywell International and Tyson Foods
The main advantage of trading using opposite Honeywell International and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Honeywell International 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.| Honeywell International vs. Tyson Foods | Honeywell International vs. Delta Air Lines | Honeywell International vs. Take Two Interactive Software | Honeywell International vs. Telecomunicaes Brasileiras SA |
| Tyson Foods vs. Spotify Technology SA | Tyson Foods vs. Palantir Technologies | Tyson Foods vs. Livetech da Bahia | Tyson Foods vs. Dell Technologies |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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