Correlation Between Tyson Foods and BancFirst

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

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

Diversification Opportunities for Tyson Foods and BancFirst

-0.51

Correlation Coefficient

Tyson Foods  BancFirst

Excellent diversification

The 3 months correlation between Tyson and BancFirst is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Tyson Foods and BancFirst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BancFirst 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 BancFirst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BancFirst has no effect on the direction of Tyson Foods i.e., Tyson Foods and BancFirst go up and down completely randomly.

Pair Corralation between Tyson Foods and BancFirst

Considering the 90-day investment horizon Tyson Foods is expected to generate 1.81 times less return on investment than BancFirst. But when comparing it to its historical volatility, Tyson Foods is 1.85 times less risky than BancFirst. It trades about 0.14 of its potential returns per unit of risk. BancFirst is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  8,544  in BancFirst on January 24, 2024 and sell it today you would earn a total of  584.00  from holding BancFirst or generate 6.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Tyson Foods  vs.  BancFirst

Tyson Foods

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tyson Foods are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Tyson Foods displayed solid returns over the last few months and may actually be approaching a breakup point.

BancFirst

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BancFirst has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, BancFirst 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 BancFirst

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

The idea behind Tyson Foods and BancFirst 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.