Correlation Between Tyson Foods and STMicroelectronics

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

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

Diversification Opportunities for Tyson Foods and STMicroelectronics

-0.21

Correlation Coefficient

Tyson Foods  STMicroelectronics

Very good diversification

The 3 months correlation between Tyson and STMicroelectronics is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and STMicroelectronics NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STMicroelectronics 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 STMicroelectronics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STMicroelectronics has no effect on the direction of Tyson Foods i.e., Tyson Foods and STMicroelectronics go up and down completely randomly.

Pair Corralation between Tyson Foods and STMicroelectronics

Assuming the 90 days trading horizon Tyson Foods is expected to under-perform the STMicroelectronics. In addition to that, Tyson Foods is 1.02 times more volatile than STMicroelectronics NV. It trades about -0.11 of its total potential returns per unit of risk. STMicroelectronics NV is currently generating about 0.38 per unit of volatility. If you would invest  14,200  in STMicroelectronics NV on September 24, 2024 and sell it today you would earn a total of  1,800  from holding STMicroelectronics NV or generate 12.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

Tyson Foods  vs.  STMicroelectronics NV

Tyson Foods

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in January 2025.

STMicroelectronics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in STMicroelectronics NV are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, STMicroelectronics is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Tyson Foods and STMicroelectronics

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

The idea behind Tyson Foods and STMicroelectronics NV 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.