Correlation Between Sun Life and Tyson Foods

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

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

Diversification Opportunities for Sun Life and Tyson Foods

0.78

Correlation Coefficient

Sun Life  Tyson Foods

Poor diversification

The 3 months correlation between Sun and Tyson is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Sun Life Financial and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Sun Life 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 Sun Life Financial 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 Sun Life i.e., Sun Life and Tyson Foods go up and down completely randomly.

Pair Corralation between Sun Life and Tyson Foods

Considering the 90-day investment horizon Sun Life Financial is expected to generate 0.63 times more return on investment than Tyson Foods. However, Sun Life Financial is 1.58 times less risky than Tyson Foods. It trades about 0.13 of its potential returns per unit of risk. Tyson Foods is currently generating about -0.01 per unit of risk. If you would invest  5,597  in Sun Life Financial on September 16, 2024 and sell it today you would earn a total of  416.00  from holding Sun Life Financial or generate 7.43% return on investment over 90 days.

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

Sun Life Financial  vs.  Tyson Foods

Sun Life Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Life Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Sun Life may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Sun Life and Tyson Foods

The main advantage of trading using opposite Sun Life and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Life 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 Sun Life Financial 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.