Correlation Between Sprouts Farmers and Tesco PLC
Can any of the company-specific risk be diversified away by investing in both Sprouts Farmers 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 Sprouts Farmers and Tesco PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sprouts Farmers Market and Tesco PLC, you can compare the effects of market volatilities on Sprouts Farmers 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 Sprouts Farmers with a short position of Tesco PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sprouts Farmers and Tesco PLC.
Diversification Opportunities for Sprouts Farmers and Tesco PLC
-0.63 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Sprouts and Tesco is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sprouts Farmers Market and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC and Sprouts Farmers 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 Sprouts Farmers Market 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 Sprouts Farmers i.e., Sprouts Farmers and Tesco PLC go up and down completely randomly.
Pair Corralation between Sprouts Farmers and Tesco PLC
Considering the 90-day investment horizon Sprouts Farmers Market is expected to generate 0.9 times more return on investment than Tesco PLC. However, Sprouts Farmers Market is 1.11 times less risky than Tesco PLC. It trades about 0.46 of its potential returns per unit of risk. Tesco PLC is currently generating about -0.02 per unit of risk. If you would invest 12,018 in Sprouts Farmers Market on August 27, 2024 and sell it today you would earn a total of 2,780 from holding Sprouts Farmers Market or generate 23.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sprouts Farmers Market vs. Tesco PLC
Performance |
| Timeline |
| Sprouts Farmers Market |
| Tesco PLC |
Sprouts Farmers and Tesco PLC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sprouts Farmers and Tesco PLC
The main advantage of trading using opposite Sprouts Farmers and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprouts Farmers 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.| Sprouts Farmers vs. Innovative Food Hldg | Sprouts Farmers vs. Calavo Growers | Sprouts Farmers vs. The Chefs Warehouse | Sprouts Farmers vs. AMCON Distributing |
| Tesco PLC vs. Ocado Group PLC | Tesco PLC vs. Carrefour SA PK | Tesco PLC vs. J Sainsbury PLC | Tesco PLC vs. Tesco PLC |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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