Correlation Between Tyson Foods and Golden Agri

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

By analyzing existing cross correlation between Tyson Foods and Golden Agri Resources, you can compare the effects of market volatilities on Tyson Foods and Golden Agri 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 Golden Agri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tyson Foods and Golden Agri.

Diversification Opportunities for Tyson Foods and Golden Agri

-0.38

Correlation Coefficient

Tyson Foods  Golden Agri

Very good diversification

The 3 months correlation between Tyson and Golden is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Golden Agri Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golden Agri Resources 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 are associated (or correlated) with Golden Agri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golden Agri Resources has no effect on the direction of Tyson Foods i.e., Tyson Foods and Golden Agri go up and down completely randomly.

Pair Corralation between Tyson Foods and Golden Agri

Considering the 90-day investment horizon Tyson Foods is expected to generate 0.25 times more return on investment than Golden Agri. However, Tyson Foods is 3.95 times less risky than Golden Agri. It trades about 0.01 of its potential returns per unit of risk. Golden Agri Resources is currently generating about -0.16 per unit of risk. If you would invest  5,751  in Tyson Foods on September 25, 2024 and sell it today you would earn a total of  32.00  from holding Tyson Foods or generate 0.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Tyson Foods  vs.  Golden Agri Resources

Tyson Foods

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Golden Agri Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Golden Agri Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Tyson Foods and Golden Agri

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

The idea behind Tyson Foods and Golden Agri Resources 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.