Correlation Between Tyson Foods and ConAgra Foods

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

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

Diversification Opportunities for Tyson Foods and ConAgra Foods

0.85

Correlation Coefficient

Tyson Foods  ConAgra Foods

Very poor diversification

The 3 months correlation between Tyson and ConAgra is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and ConAgra Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConAgra Foods 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 ConAgra Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConAgra Foods has no effect on the direction of Tyson Foods i.e., Tyson Foods and ConAgra Foods go up and down completely randomly.

Pair Corralation between Tyson Foods and ConAgra Foods

Considering the 90-day investment horizon Tyson Foods is expected to generate 1.03 times less return on investment than ConAgra Foods. But when comparing it to its historical volatility, Tyson Foods is 1.36 times less risky than ConAgra Foods. It trades about 0.18 of its potential returns per unit of risk. ConAgra Foods is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,935  in ConAgra Foods on February 1, 2024 and sell it today you would earn a total of  143.00  from holding ConAgra Foods or generate 4.87% return on investment over 90 days.

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

Tyson Foods  vs.  ConAgra Foods

Tyson Foods

Risk-Adjusted Performance

8 of 100

Good

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. In spite of very fragile basic indicators, Tyson Foods may actually be approaching a critical reversion point that can send shares even higher in June 2024.

ConAgra Foods

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ConAgra Foods are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, ConAgra Foods is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Tyson Foods and ConAgra Foods

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

The idea behind Tyson Foods and ConAgra 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.