Correlation Between Tyson Foods and Aptiv PLC

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

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

Diversification Opportunities for Tyson Foods and Aptiv PLC

-0.18

Correlation Coefficient

Tyson Foods  Aptiv PLC

Good diversification

The 3 months correlation between Tyson and Aptiv is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and Aptiv PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptiv PLC 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 Aptiv PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptiv PLC has no effect on the direction of Tyson Foods i.e., Tyson Foods and Aptiv PLC go up and down completely randomly.

Pair Corralation between Tyson Foods and Aptiv PLC

Considering the 90-day investment horizon Tyson Foods is expected to generate 0.65 times more return on investment than Aptiv PLC. However, Tyson Foods is 1.54 times less risky than Aptiv PLC. It trades about 0.03 of its potential returns per unit of risk. Aptiv PLC is currently generating about -0.01 per unit of risk. If you would invest  5,703  in Tyson Foods on July 13, 2024 and sell it today you would earn a total of  116.00  from holding Tyson Foods or generate 2.03% return on investment over 90 days.

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

Tyson Foods  vs.  Aptiv PLC

Tyson Foods

Risk-Adjusted Performance

2 of 100

Weak

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

Aptiv PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aptiv PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Aptiv PLC is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Tyson Foods and Aptiv PLC

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

The idea behind Tyson Foods and Aptiv PLC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.