Correlation Between Tesco PLC and Dingdong ADR
Can any of the company-specific risk be diversified away by investing in both Tesco PLC and Dingdong ADR 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 Dingdong ADR into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesco PLC and Dingdong ADR, you can compare the effects of market volatilities on Tesco PLC and Dingdong ADR 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 Dingdong ADR. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesco PLC and Dingdong ADR.
Diversification Opportunities for Tesco PLC and Dingdong ADR
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Tesco and Dingdong is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and Dingdong ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dingdong ADR 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 are associated (or correlated) with Dingdong ADR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dingdong ADR has no effect on the direction of Tesco PLC i.e., Tesco PLC and Dingdong ADR go up and down completely randomly.
Pair Corralation between Tesco PLC and Dingdong ADR
Assuming the 90 days horizon Tesco PLC is expected to generate 2.85 times less return on investment than Dingdong ADR. But when comparing it to its historical volatility, Tesco PLC is 2.02 times less risky than Dingdong ADR. It trades about 0.06 of its potential returns per unit of risk. Dingdong ADR is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 189.00 in Dingdong ADR on September 2, 2024 and sell it today you would earn a total of 239.00 from holding Dingdong ADR or generate 126.46% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 88.31% |
| Values | Daily Returns |
Tesco PLC vs. Dingdong ADR
Performance |
| Timeline |
| Tesco PLC |
| Dingdong ADR |
Tesco PLC and Dingdong ADR Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesco PLC and Dingdong ADR
The main advantage of trading using opposite Tesco PLC and Dingdong ADR positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesco PLC position performs unexpectedly, Dingdong ADR 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 Dingdong ADR will offset losses from the drop in Dingdong ADR's long position.| Tesco PLC vs. Carrefour SA PK | Tesco PLC vs. J Sainsbury PLC | Tesco PLC vs. Sendas Distribuidora SA | Tesco PLC vs. Weis Markets |
| Dingdong ADR vs. Village Super Market | Dingdong ADR vs. Weis Markets | Dingdong ADR vs. Sendas Distribuidora SA | Dingdong ADR vs. Ingles Markets Incorporated |
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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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