Correlation Between TYSON FOODS and GigaMedia

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

Diversification Opportunities for TYSON FOODS and GigaMedia

0.8

Correlation Coefficient

TYSON FOODS  GigaMedia

Very poor diversification

The 3 months correlation between TYSON and GigaMedia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding TYSON FOODS A and GigaMedia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GigaMedia 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 GigaMedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GigaMedia has no effect on the direction of TYSON FOODS i.e., TYSON FOODS and GigaMedia go up and down completely randomly.

Pair Corralation between TYSON FOODS and GigaMedia

Assuming the 90 days trading horizon TYSON FOODS A is expected to under-perform the GigaMedia. In addition to that, TYSON FOODS is 1.41 times more volatile than GigaMedia. It trades about -0.2 of its total potential returns per unit of risk. GigaMedia is currently generating about -0.11 per unit of volatility. If you would invest  136.00  in GigaMedia on September 21, 2024 and sell it today you would lose (2.00) from holding GigaMedia or give up 1.47% of portfolio value over 90 days.

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

TYSON FOODS A   vs.  GigaMedia

TYSON FOODS A

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in TYSON FOODS A are ranked lower than 5 (%) 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.

GigaMedia

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GigaMedia are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GigaMedia unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TYSON FOODS and GigaMedia

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

The idea behind TYSON FOODS A and GigaMedia 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.