Correlation Between AHOLD DELHAIADR16 and TESCO PLC

Can any of the company-specific risk be diversified away by investing in both AHOLD DELHAIADR16 and TESCO PLC 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 AHOLD DELHAIADR16 and TESCO PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between AHOLD DELHAIADR16 EO 25 and TESCO PLC LS 0633333, you can compare the effects of market volatilities on AHOLD DELHAIADR16 and TESCO PLC 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 AHOLD DELHAIADR16 with a short position of TESCO PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of AHOLD DELHAIADR16 and TESCO PLC.

Diversification Opportunities for AHOLD DELHAIADR16 and TESCO PLC

0.22

Correlation Coefficient

AHOLD DELHAIADR16  TESCO PLC

Modest diversification

The 3 months correlation between AHOLD and TESCO is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding AHOLD DELHAIADR16 EO 25 and TESCO PLC LS 0633333 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TESCO PLC LS and AHOLD DELHAIADR16 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 AHOLD DELHAIADR16 EO 25 are associated (or correlated) with TESCO PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TESCO PLC LS has no effect on the direction of AHOLD DELHAIADR16 i.e., AHOLD DELHAIADR16 and TESCO PLC go up and down completely randomly.

Pair Corralation between AHOLD DELHAIADR16 and TESCO PLC

Assuming the 90 days trading horizon AHOLD DELHAIADR16 is expected to generate 2.29 times less return on investment than TESCO PLC. In addition to that, AHOLD DELHAIADR16 is 1.11 times more volatile than TESCO PLC LS 0633333. It trades about 0.03 of its total potential returns per unit of risk. TESCO PLC LS 0633333 is currently generating about 0.08 per unit of volatility. If you would invest  249.00  in TESCO PLC LS 0633333 on September 29, 2024 and sell it today you would earn a total of  195.00  from holding TESCO PLC LS 0633333 or generate 78.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

AHOLD DELHAIADR16 EO 25  vs.  TESCO PLC LS 0633333

AHOLD DELHAIADR16

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AHOLD DELHAIADR16 EO 25 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, AHOLD DELHAIADR16 is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

TESCO PLC LS

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in TESCO PLC LS 0633333 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, TESCO PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with AHOLD DELHAIADR16 and TESCO PLC

The main advantage of trading using opposite AHOLD DELHAIADR16 and TESCO PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AHOLD DELHAIADR16 position performs unexpectedly, TESCO PLC 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 TESCO PLC will offset losses from the drop in TESCO PLC's long position.

The idea behind AHOLD DELHAIADR16 EO 25 and TESCO PLC LS 0633333 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.