Correlation Between Cleantech Power and Tyson Foods

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

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

Diversification Opportunities for Cleantech Power and Tyson Foods

0.0

Correlation Coefficient

Cleantech Power  Tyson Foods

Pay attention - limited upside

The 3 months correlation between Cleantech and Tyson is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cleantech Power Corp and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Cleantech Power 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 Cleantech Power Corp 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 Cleantech Power i.e., Cleantech Power and Tyson Foods go up and down completely randomly.

Pair Corralation between Cleantech Power and Tyson Foods

Assuming the 90 days horizon Cleantech Power Corp is expected to generate 48.31 times more return on investment than Tyson Foods. However, Cleantech Power is 48.31 times more volatile than Tyson Foods. It trades about 0.06 of its potential returns per unit of risk. Tyson Foods is currently generating about 0.05 per unit of risk. If you would invest  1.00  in Cleantech Power Corp on September 20, 2024 and sell it today you would lose (0.41) from holding Cleantech Power Corp or give up 41.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cleantech Power Corp  vs.  Tyson Foods

Cleantech Power Corp

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Cleantech Power Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Cleantech Power is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 Cleantech Power and Tyson Foods

The main advantage of trading using opposite Cleantech Power and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cleantech Power 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 Cleantech Power Corp 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.