Correlation Between TESCO PLC and Woolworths Group
Can any of the company-specific risk be diversified away by investing in both TESCO PLC and Woolworths Group 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 TESCO PLC and Woolworths Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TESCO PLC ADR1 and Woolworths Group Limited, you can compare the effects of market volatilities on TESCO PLC and Woolworths Group 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 TESCO PLC with a short position of Woolworths Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of TESCO PLC and Woolworths Group.
Diversification Opportunities for TESCO PLC and Woolworths Group
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between TESCO and Woolworths is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding TESCO PLC ADR1 and Woolworths Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woolworths Group and TESCO PLC 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 TESCO PLC ADR1 are associated (or correlated) with Woolworths Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woolworths Group has no effect on the direction of TESCO PLC i.e., TESCO PLC and Woolworths Group go up and down completely randomly.
Pair Corralation between TESCO PLC and Woolworths Group
Assuming the 90 days trading horizon TESCO PLC ADR1 is expected to generate 1.41 times more return on investment than Woolworths Group. However, TESCO PLC is 1.41 times more volatile than Woolworths Group Limited. It trades about 0.04 of its potential returns per unit of risk. Woolworths Group Limited is currently generating about -0.14 per unit of risk. If you would invest 1,233 in TESCO PLC ADR1 on September 13, 2024 and sell it today you would earn a total of 37.00 from holding TESCO PLC ADR1 or generate 3.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
TESCO PLC ADR1 vs. Woolworths Group Limited
Performance |
| Timeline |
| TESCO PLC ADR1 |
| Woolworths Group |
TESCO PLC and Woolworths Group Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with TESCO PLC and Woolworths Group
The main advantage of trading using opposite TESCO PLC and Woolworths Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TESCO PLC position performs unexpectedly, Woolworths Group 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 Woolworths Group will offset losses from the drop in Woolworths Group's long position.| TESCO PLC vs. ePlay Digital | TESCO PLC vs. CARSALESCOM | TESCO PLC vs. Columbia Sportswear | TESCO PLC vs. Ming Le Sports |
| Woolworths Group vs. Loblaw Companies Limited | Woolworths Group vs. Superior Plus Corp | Woolworths Group vs. SIVERS SEMICONDUCTORS AB | Woolworths Group vs. Norsk Hydro ASA |
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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