Correlation Between Western Digital and Tyson Foods

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Can any of the company-specific risk be diversified away by investing in both Western Digital 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 Western Digital and Tyson Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and Tyson Foods, you can compare the effects of market volatilities on Western Digital 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 Western Digital with a short position of Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and Tyson Foods.

Diversification Opportunities for Western Digital and Tyson Foods

WesternTysonDiversified AwayWesternTysonDiversified Away100%
0.52
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Western and Tyson is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Western Digital 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 Western Digital 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 Western Digital i.e., Western Digital and Tyson Foods go up and down completely randomly.

Pair Corralation between Western Digital and Tyson Foods

Considering the 90-day investment horizon Western Digital is expected to under-perform the Tyson Foods. In addition to that, Western Digital is 4.68 times more volatile than Tyson Foods. It trades about -0.15 of its total potential returns per unit of risk. Tyson Foods is currently generating about 0.18 per unit of volatility. If you would invest  5,806  in Tyson Foods on November 27, 2024 and sell it today you would earn a total of  281.00  from holding Tyson Foods or generate 4.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy95.24%
ValuesDaily Returns

Western Digital  vs.  Tyson Foods

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-5051015
JavaScript chart by amCharts 3.21.15WDC TSN
       Timeline  
Western Digital 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Western Digital has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Western Digital is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb505560657075
Tyson Foods 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb545658606264

Western Digital and Tyson Foods Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-7.9-5.92-3.93-1.950.02.014.066.118.15 0.050.100.150.200.25
JavaScript chart by amCharts 3.21.15WDC TSN
       Returns  

Pair Trading with Western Digital and Tyson Foods

The main advantage of trading using opposite Western Digital and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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 Western Digital 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.
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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