Correlation Between Tesco PLC and Carrefour
Can any of the company-specific risk be diversified away by investing in both Tesco PLC and Carrefour 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 Carrefour into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesco PLC and Carrefour SA PK, you can compare the effects of market volatilities on Tesco PLC and Carrefour 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 Carrefour. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesco PLC and Carrefour.
Diversification Opportunities for Tesco PLC and Carrefour
Very poor diversification
The 3 months correlation between Tesco and Carrefour is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and Carrefour SA PK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carrefour SA PK 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 Carrefour. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carrefour SA PK has no effect on the direction of Tesco PLC i.e., Tesco PLC and Carrefour go up and down completely randomly.
Pair Corralation between Tesco PLC and Carrefour
Assuming the 90 days horizon Tesco PLC is expected to under-perform the Carrefour. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tesco PLC is 1.98 times less risky than Carrefour. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Carrefour SA PK is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 313.00 in Carrefour SA PK on August 28, 2024 and sell it today you would lose (9.00) from holding Carrefour SA PK or give up 2.88% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesco PLC vs. Carrefour SA PK
Performance |
| Timeline |
| Tesco PLC |
| Carrefour SA PK |
Tesco PLC and Carrefour Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesco PLC and Carrefour
The main advantage of trading using opposite Tesco PLC and Carrefour positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesco PLC position performs unexpectedly, Carrefour 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 Carrefour will offset losses from the drop in Carrefour's long position.| Tesco PLC vs. Ocado Group PLC | Tesco PLC vs. Dairy Farm International | Tesco PLC vs. Woolworths Group Limited | Tesco PLC vs. Kesko Oyj ADR |
| Carrefour vs. Natural Grocers by | Carrefour vs. Grocery Outlet Holding | Carrefour vs. Village Super Market | Carrefour 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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