Correlation Between United Rentals and Tyson Foods

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

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

Diversification Opportunities for United Rentals and Tyson Foods

0.41

Correlation Coefficient

United Rentals  Tyson Foods

Very weak diversification

The 3 months correlation between United and Tyson is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding United Rentals and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and United Rentals 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 United Rentals are associated (or correlated) with Tyson Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tyson Foods has no effect on the direction of United Rentals i.e., United Rentals and Tyson Foods go up and down completely randomly.

Pair Corralation between United Rentals and Tyson Foods

Assuming the 90 days trading horizon United Rentals is expected to generate 2.75 times less return on investment than Tyson Foods. In addition to that, United Rentals is 2.49 times more volatile than Tyson Foods. It trades about 0.02 of its total potential returns per unit of risk. Tyson Foods is currently generating about 0.15 per unit of volatility. If you would invest  32,256  in Tyson Foods on October 1, 2024 and sell it today you would earn a total of  4,680  from holding Tyson Foods or generate 14.51% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.08%
Values	Daily Returns

United Rentals  vs.  Tyson Foods

United Rentals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in United Rentals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, United Rentals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Tyson Foods

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Tyson Foods sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with United Rentals and Tyson Foods

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

The idea behind United Rentals and Tyson Foods 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..