Correlation Between FLOWERS and Tyson Foods

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

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

Diversification Opportunities for FLOWERS and Tyson Foods

-0.29

Correlation Coefficient

FLOWERS  Tyson Foods

Very good diversification

The 3 months correlation between FLOWERS and Tyson is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding FLOWERS FOODS INC and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and FLOWERS 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 FLOWERS FOODS INC 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 FLOWERS i.e., FLOWERS and Tyson Foods go up and down completely randomly.

Pair Corralation between FLOWERS and Tyson Foods

Assuming the 90 days trading horizon FLOWERS FOODS INC is expected to under-perform the Tyson Foods. But the bond apears to be less risky and, when comparing its historical volatility, FLOWERS FOODS INC is 1.59 times less risky than Tyson Foods. The bond trades about -0.06 of its potential returns per unit of risk. The Tyson Foods is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  6,132  in Tyson Foods on September 17, 2024 and sell it today you would lose (84.00) from holding Tyson Foods or give up 1.37% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.63%
Values	Daily Returns

FLOWERS FOODS INC  vs.  Tyson Foods

FLOWERS FOODS INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FLOWERS FOODS INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, FLOWERS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Tyson Foods

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tyson Foods has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Pair Trading with FLOWERS and Tyson Foods

The main advantage of trading using opposite FLOWERS and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FLOWERS 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 FLOWERS FOODS INC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.