Correlation Between Tyson Foods and KENNAMETAL INC
Can any of the company-specific risk be diversified away by investing in both Tyson Foods and KENNAMETAL INC 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 KENNAMETAL INC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tyson Foods and KENNAMETAL INC, you can compare the effects of market volatilities on Tyson Foods and KENNAMETAL INC 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 KENNAMETAL INC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tyson Foods and KENNAMETAL INC.
Diversification Opportunities for Tyson Foods and KENNAMETAL INC
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Tyson and KENNAMETAL is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and KENNAMETAL INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KENNAMETAL INC 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 KENNAMETAL INC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KENNAMETAL INC has no effect on the direction of Tyson Foods i.e., Tyson Foods and KENNAMETAL INC go up and down completely randomly.
Pair Corralation between Tyson Foods and KENNAMETAL INC
Assuming the 90 days trading horizon Tyson Foods is expected to generate 1.61 times less return on investment than KENNAMETAL INC. But when comparing it to its historical volatility, Tyson Foods is 1.12 times less risky than KENNAMETAL INC. It trades about 0.01 of its potential returns per unit of risk. KENNAMETAL INC is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 2,338 in KENNAMETAL INC on October 16, 2024 and sell it today you would lose (18.00) from holding KENNAMETAL INC or give up 0.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tyson Foods vs. KENNAMETAL INC
Performance |
| Timeline |
| Tyson Foods |
| KENNAMETAL INC |
Tyson Foods and KENNAMETAL INC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tyson Foods and KENNAMETAL INC
The main advantage of trading using opposite Tyson Foods and KENNAMETAL INC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tyson Foods position performs unexpectedly, KENNAMETAL INC 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 KENNAMETAL INC will offset losses from the drop in KENNAMETAL INC's long position.| Tyson Foods vs. INTERCONT HOTELS | Tyson Foods vs. Sunstone Hotel Investors | Tyson Foods vs. Gol Intelligent Airlines | Tyson Foods vs. Playa Hotels Resorts |
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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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