Correlation Between Generac Holdings and Tesco PLC
Can any of the company-specific risk be diversified away by investing in both Generac Holdings and Tesco 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 Generac Holdings and Tesco PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Generac Holdings and Tesco PLC, you can compare the effects of market volatilities on Generac Holdings and Tesco 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 Generac Holdings with a short position of Tesco PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Generac Holdings and Tesco PLC.
Diversification Opportunities for Generac Holdings and Tesco PLC
-0.76 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Generac and Tesco is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Generac Holdings and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC and Generac Holdings 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 Generac Holdings are associated (or correlated) with Tesco PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tesco PLC has no effect on the direction of Generac Holdings i.e., Generac Holdings and Tesco PLC go up and down completely randomly.
Pair Corralation between Generac Holdings and Tesco PLC
Given the investment horizon of 90 days Generac Holdings is expected to generate 1.79 times more return on investment than Tesco PLC. However, Generac Holdings is 1.79 times more volatile than Tesco PLC. It trades about 0.32 of its potential returns per unit of risk. Tesco PLC is currently generating about -0.15 per unit of risk. If you would invest 16,565 in Generac Holdings on August 27, 2024 and sell it today you would earn a total of 2,343 from holding Generac Holdings or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Generac Holdings vs. Tesco PLC
Performance |
| Timeline |
| Generac Holdings |
| Tesco PLC |
Generac Holdings and Tesco PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Generac Holdings and Tesco PLC
The main advantage of trading using opposite Generac Holdings and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generac Holdings position performs unexpectedly, Tesco 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 Tesco PLC will offset losses from the drop in Tesco PLC's long position.| Generac Holdings vs. Emerson Electric | Generac Holdings vs. Eaton PLC | Generac Holdings vs. Parker Hannifin | Generac Holdings vs. Illinois Tool Works |
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Check out your portfolio center.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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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