Correlation Between Ocado Group and Tesco PLC
Can any of the company-specific risk be diversified away by investing in both Ocado Group 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 Ocado Group and Tesco PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ocado Group PLC and Tesco PLC, you can compare the effects of market volatilities on Ocado Group 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 Ocado Group with a short position of Tesco PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ocado Group and Tesco PLC.
Diversification Opportunities for Ocado Group and Tesco PLC
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Ocado and Tesco is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ocado Group PLC and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC and Ocado Group 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 Ocado Group PLC 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 Ocado Group i.e., Ocado Group and Tesco PLC go up and down completely randomly.
Pair Corralation between Ocado Group and Tesco PLC
Assuming the 90 days horizon Ocado Group PLC is expected to under-perform the Tesco PLC. In addition to that, Ocado Group is 1.88 times more volatile than Tesco PLC. It trades about -0.4 of its total potential returns per unit of risk. Tesco PLC is currently generating about -0.15 per unit of volatility. If you would invest 1,379 in Tesco PLC on August 28, 2024 and sell it today you would lose (51.00) from holding Tesco PLC or give up 3.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Ocado Group PLC vs. Tesco PLC
Performance |
| Timeline |
| Ocado Group PLC |
| Tesco PLC |
Ocado Group and Tesco PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ocado Group and Tesco PLC
The main advantage of trading using opposite Ocado Group and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocado Group 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.| Ocado Group vs. Tesco PLC | Ocado Group vs. Dairy Farm International | Ocado Group vs. Woolworths Group Limited | Ocado Group vs. Kesko Oyj ADR |
| Tesco PLC vs. Ocado Group PLC | Tesco PLC vs. Dairy Farm International | Tesco PLC vs. Woolworths Group Limited | Tesco PLC vs. Kesko Oyj ADR |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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