Correlation Between Tyson Foods and United Utilities
Can any of the company-specific risk be diversified away by investing in both Tyson Foods and United Utilities 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 United Utilities into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tyson Foods and United Utilities Group, you can compare the effects of market volatilities on Tyson Foods and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tyson Foods and United Utilities.
Diversification Opportunities for Tyson Foods and United Utilities
0.32 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Tyson and United is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Tyson Foods i.e., Tyson Foods and United Utilities go up and down completely randomly.
Pair Corralation between Tyson Foods and United Utilities
Considering the 90-day investment horizon Tyson Foods is expected to under-perform the United Utilities. But the stock apears to be less risky and, when comparing its historical volatility, Tyson Foods is 1.24 times less risky than United Utilities. The stock trades about 0.0 of its potential returns per unit of risk. The United Utilities Group is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 1,270 in United Utilities Group on October 11, 2024 and sell it today you would earn a total of 124.00 from holding United Utilities Group or generate 9.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 62.02% |
| Values | Daily Returns |
Tyson Foods vs. United Utilities Group
Performance |
| Timeline |
| Tyson Foods |
| United Utilities |
Tyson Foods and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tyson Foods and United Utilities
The main advantage of trading using opposite Tyson Foods and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tyson Foods position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Tyson Foods vs. Bunge Limited | Tyson Foods vs. Cal Maine Foods | Tyson Foods vs. Dole PLC | Tyson Foods vs. Adecoagro SA |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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