Correlation Between Tesco PLC and Dairy Farm
Can any of the company-specific risk be diversified away by investing in both Tesco PLC and Dairy Farm 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 Dairy Farm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesco PLC and Dairy Farm International, you can compare the effects of market volatilities on Tesco PLC and Dairy Farm 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 Dairy Farm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesco PLC and Dairy Farm.
Diversification Opportunities for Tesco PLC and Dairy Farm
-0.8 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Tesco and Dairy is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and Dairy Farm International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dairy Farm International 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 Dairy Farm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dairy Farm International has no effect on the direction of Tesco PLC i.e., Tesco PLC and Dairy Farm go up and down completely randomly.
Pair Corralation between Tesco PLC and Dairy Farm
Assuming the 90 days horizon Tesco PLC is expected to generate 4.0 times less return on investment than Dairy Farm. But when comparing it to its historical volatility, Tesco PLC is 1.74 times less risky than Dairy Farm. It trades about 0.13 of its potential returns per unit of risk. Dairy Farm International is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 1,086 in Dairy Farm International on September 2, 2024 and sell it today you would earn a total of 169.00 from holding Dairy Farm International or generate 15.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Tesco PLC vs. Dairy Farm International
Performance |
| Timeline |
| Tesco PLC |
| Dairy Farm International |
Tesco PLC and Dairy Farm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Tesco PLC and Dairy Farm
The main advantage of trading using opposite Tesco PLC and Dairy Farm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesco PLC position performs unexpectedly, Dairy Farm 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 Dairy Farm will offset losses from the drop in Dairy Farm'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 |
| Dairy Farm vs. Etablissementen Franz Colruyt | Dairy Farm vs. Seven i Holdings | Dairy Farm vs. Carrefour SA PK | Dairy Farm vs. J Sainsbury 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 Stocks Directory module to find actively traded stocks across global markets.
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