Correlation Between Grocery Outlet and Tyson Foods

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

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

Diversification Opportunities for Grocery Outlet and Tyson Foods

0.56

Correlation Coefficient

Grocery Outlet  Tyson Foods

Very weak diversification

The 3 months correlation between Grocery and Tyson is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and Tyson Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tyson Foods and Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and Tyson Foods go up and down completely randomly.

Pair Corralation between Grocery Outlet and Tyson Foods

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to under-perform the Tyson Foods. In addition to that, Grocery Outlet is 1.47 times more volatile than Tyson Foods. It trades about -0.22 of its total potential returns per unit of risk. Tyson Foods is currently generating about 0.2 per unit of volatility. If you would invest  5,785  in Tyson Foods on January 30, 2024 and sell it today you would earn a total of  312.00  from holding Tyson Foods or generate 5.39% return on investment over 90 days.

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

Grocery Outlet Holding  vs.  Tyson Foods

Grocery Outlet Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Tyson Foods

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Grocery Outlet and Tyson Foods

The main advantage of trading using opposite Grocery Outlet and Tyson Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet Holding 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.