Correlation Between Tesco PLC and Sprouts Farmers
Can any of the company-specific risk be diversified away by investing in both Tesco PLC and Sprouts Farmers 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 Sprouts Farmers into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesco PLC and Sprouts Farmers Market, you can compare the effects of market volatilities on Tesco PLC and Sprouts Farmers 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 Sprouts Farmers. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesco PLC and Sprouts Farmers.
Diversification Opportunities for Tesco PLC and Sprouts Farmers
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Tesco and Sprouts is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and Sprouts Farmers Market in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprouts Farmers Market 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 Sprouts Farmers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprouts Farmers Market has no effect on the direction of Tesco PLC i.e., Tesco PLC and Sprouts Farmers go up and down completely randomly.
Pair Corralation between Tesco PLC and Sprouts Farmers
Assuming the 90 days horizon Tesco PLC is expected to generate 1.98 times less return on investment than Sprouts Farmers. In addition to that, Tesco PLC is 1.72 times more volatile than Sprouts Farmers Market. It trades about 0.05 of its total potential returns per unit of risk. Sprouts Farmers Market is currently generating about 0.18 per unit of volatility. If you would invest 3,279 in Sprouts Farmers Market on November 1, 2024 and sell it today you would earn a total of 12,346 from holding Sprouts Farmers Market or generate 376.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 90.93% |
| Values | Daily Returns |
Tesco PLC vs. Sprouts Farmers Market
Performance |
| Timeline |
| Tesco PLC |
| Sprouts Farmers Market |
Tesco PLC and Sprouts Farmers Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesco PLC and Sprouts Farmers
The main advantage of trading using opposite Tesco PLC and Sprouts Farmers positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesco PLC position performs unexpectedly, Sprouts Farmers 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 Sprouts Farmers will offset losses from the drop in Sprouts Farmers' long position.| Tesco PLC vs. Ocado Group PLC | Tesco PLC vs. Carrefour SA PK | Tesco PLC vs. J Sainsbury PLC | Tesco PLC vs. Tesco PLC |
| Sprouts Farmers vs. Natural Grocers by | Sprouts Farmers vs. Albertsons Companies | Sprouts Farmers vs. Ingles Markets Incorporated | Sprouts Farmers vs. Village Super Market |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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