Correlation Between TYSON FOODS and CF Industries

Can any of the company-specific risk be diversified away by investing in both TYSON FOODS and CF Industries 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 CF Industries 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 CF Industries Holdings, you can compare the effects of market volatilities on TYSON FOODS and CF Industries 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 CF Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of TYSON FOODS and CF Industries.

Diversification Opportunities for TYSON FOODS and CF Industries

0.74

Correlation Coefficient

TYSON FOODS  CF Industries

Poor diversification

The 3 months correlation between TYSON and C4F is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding TYSON FOODS A and CF Industries Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Industries Holdings 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 CF Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Industries Holdings has no effect on the direction of TYSON FOODS i.e., TYSON FOODS and CF Industries go up and down completely randomly.

Pair Corralation between TYSON FOODS and CF Industries

Assuming the 90 days trading horizon TYSON FOODS A is expected to generate 0.91 times more return on investment than CF Industries. However, TYSON FOODS A is 1.1 times less risky than CF Industries. It trades about 0.09 of its potential returns per unit of risk. CF Industries Holdings is currently generating about 0.06 per unit of risk. If you would invest  4,234  in TYSON FOODS A on September 14, 2024 and sell it today you would earn a total of  1,612  from holding TYSON FOODS A or generate 38.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.64%
Values	Daily Returns

TYSON FOODS A   vs.  CF Industries Holdings

TYSON FOODS A

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TYSON FOODS A are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, TYSON FOODS may actually be approaching a critical reversion point that can send shares even higher in January 2025.

CF Industries Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Industries Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, CF Industries reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TYSON FOODS and CF Industries

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

The idea behind TYSON FOODS A and CF Industries Holdings 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.