Correlation Between TYSON FOODS and Air Transport

Can any of the company-specific risk be diversified away by investing in both TYSON FOODS and Air Transport 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 TYSON FOODS and Air Transport into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between TYSON FOODS A and Air Transport Services, you can compare the effects of market volatilities on TYSON FOODS and Air Transport 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 TYSON FOODS with a short position of Air Transport. Check out your portfolio center. Please also check ongoing floating volatility patterns of TYSON FOODS and Air Transport.

Diversification Opportunities for TYSON FOODS and Air Transport

0.65

Correlation Coefficient

TYSON FOODS  Air Transport

Poor diversification

The 3 months correlation between TYSON and Air is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding TYSON FOODS A and Air Transport Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Transport Services and TYSON FOODS 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 TYSON FOODS A are associated (or correlated) with Air Transport. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Transport Services has no effect on the direction of TYSON FOODS i.e., TYSON FOODS and Air Transport go up and down completely randomly.

Pair Corralation between TYSON FOODS and Air Transport

Assuming the 90 days trading horizon TYSON FOODS is expected to generate 6.77 times less return on investment than Air Transport. But when comparing it to its historical volatility, TYSON FOODS A is 2.25 times less risky than Air Transport. It trades about 0.06 of its potential returns per unit of risk. Air Transport Services is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  1,410  in Air Transport Services on September 4, 2024 and sell it today you would earn a total of  670.00  from holding Air Transport Services or generate 47.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

TYSON FOODS A   vs.  Air Transport Services

TYSON FOODS A

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TYSON FOODS A are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, TYSON FOODS is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Air Transport Services

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Air Transport Services are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Air Transport reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TYSON FOODS and Air Transport

The main advantage of trading using opposite TYSON FOODS and Air Transport positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TYSON FOODS position performs unexpectedly, Air Transport 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 Air Transport will offset losses from the drop in Air Transport's long position.

The idea behind TYSON FOODS A and Air Transport Services 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.