Correlation Between Eco Animal and Tyson Foods

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

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

Diversification Opportunities for Eco Animal and Tyson Foods

-0.24

Correlation Coefficient

Eco Animal  Tyson Foods

Very good diversification

The 3 months correlation between Eco and Tyson is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Eco Animal Health and Tyson Foods Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods Cl and Eco Animal 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 Eco Animal Health 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 Cl has no effect on the direction of Eco Animal i.e., Eco Animal and Tyson Foods go up and down completely randomly.

Pair Corralation between Eco Animal and Tyson Foods

Assuming the 90 days trading horizon Eco Animal Health is expected to under-perform the Tyson Foods. In addition to that, Eco Animal is 1.49 times more volatile than Tyson Foods Cl. It trades about -0.02 of its total potential returns per unit of risk. Tyson Foods Cl is currently generating about 0.01 per unit of volatility. If you would invest  5,855  in Tyson Foods Cl on September 21, 2024 and sell it today you would earn a total of  29.00  from holding Tyson Foods Cl or generate 0.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.4%
Values	Daily Returns

Eco Animal Health  vs.  Tyson Foods Cl

Eco Animal Health

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eco Animal Health has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Tyson Foods Cl

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tyson Foods Cl has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Tyson Foods is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Eco Animal and Tyson Foods

The main advantage of trading using opposite Eco Animal and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eco Animal 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 Eco Animal Health and Tyson Foods Cl 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.