Correlation Between Tyson Foods and AES

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

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

Diversification Opportunities for Tyson Foods and AES

0.5

Correlation Coefficient

Tyson Foods  AES

Very weak diversification

The 3 months correlation between Tyson and AES is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and The AES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AES 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 AES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AES has no effect on the direction of Tyson Foods i.e., Tyson Foods and AES go up and down completely randomly.

Pair Corralation between Tyson Foods and AES

Assuming the 90 days trading horizon Tyson Foods is expected to generate 0.84 times more return on investment than AES. However, Tyson Foods is 1.19 times less risky than AES. It trades about 0.19 of its potential returns per unit of risk. The AES is currently generating about 0.0 per unit of risk. If you would invest  5,362  in Tyson Foods on February 2, 2024 and sell it today you would earn a total of  326.00  from holding Tyson Foods or generate 6.08% return on investment over 90 days.

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

Tyson Foods  vs.  The AES

Tyson Foods

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in June 2024.

AES

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in The AES are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, AES may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Tyson Foods and AES

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

The idea behind Tyson Foods and The AES 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.