Correlation Between A2 Milk and Tyson Foods

Can any of the company-specific risk be diversified away by investing in both A2 Milk 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 A2 Milk and Tyson Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The A2 Milk and Tyson Foods, you can compare the effects of market volatilities on A2 Milk 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 A2 Milk with a short position of Tyson Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of A2 Milk and Tyson Foods.

Diversification Opportunities for A2 Milk and Tyson Foods

-0.67

Correlation Coefficient

A2 Milk  Tyson Foods

Excellent diversification

The 3 months correlation between ACOPY and Tyson is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding The A2 Milk and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and A2 Milk 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 The A2 Milk 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 A2 Milk i.e., A2 Milk and Tyson Foods go up and down completely randomly.

Pair Corralation between A2 Milk and Tyson Foods

Assuming the 90 days horizon The A2 Milk is expected to generate 3.36 times more return on investment than Tyson Foods. However, A2 Milk is 3.36 times more volatile than Tyson Foods. It trades about 0.01 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.03 per unit of risk. If you would invest  357.00  in The A2 Milk on September 23, 2024 and sell it today you would lose (12.00) from holding The A2 Milk or give up 3.36% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

The A2 Milk  vs.  Tyson Foods

A2 Milk

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The A2 Milk has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, A2 Milk is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tyson Foods

Risk-Adjusted Performance

0 of 100

Very Weak

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.

Pair Trading with A2 Milk and Tyson Foods

The main advantage of trading using opposite A2 Milk and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if A2 Milk 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 The A2 Milk 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.

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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.