Correlation Between TESCO PLC and SEVEN+I HLDGS

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

By analyzing existing cross correlation between TESCO PLC ADR1 and SEVENI HLDGS UNSPADR12, you can compare the effects of market volatilities on TESCO PLC and SEVEN+I HLDGS 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 SEVEN+I HLDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of TESCO PLC and SEVEN+I HLDGS.

Diversification Opportunities for TESCO PLC and SEVEN+I HLDGS

-0.15

Correlation Coefficient

TESCO PLC  SEVEN+I HLDGS

Good diversification

The 3 months correlation between TESCO and SEVEN+I is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding TESCO PLC ADR1 and SEVENI HLDGS UNSPADR12 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SEVENI HLDGS UNSPADR12 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 ADR1 are associated (or correlated) with SEVEN+I HLDGS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SEVENI HLDGS UNSPADR12 has no effect on the direction of TESCO PLC i.e., TESCO PLC and SEVEN+I HLDGS go up and down completely randomly.

Pair Corralation between TESCO PLC and SEVEN+I HLDGS

Assuming the 90 days trading horizon TESCO PLC ADR1 is expected to generate 1.19 times more return on investment than SEVEN+I HLDGS. However, TESCO PLC is 1.19 times more volatile than SEVENI HLDGS UNSPADR12. It trades about 0.01 of its potential returns per unit of risk. SEVENI HLDGS UNSPADR12 is currently generating about 0.01 per unit of risk. If you would invest  1,273  in TESCO PLC ADR1 on September 24, 2024 and sell it today you would earn a total of  7.00  from holding TESCO PLC ADR1 or generate 0.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

TESCO PLC ADR1  vs.  SEVENI HLDGS UNSPADR12

TESCO PLC ADR1

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TESCO PLC ADR1 are ranked lower than 1 (%) 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.

SEVENI HLDGS UNSPADR12

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SEVENI HLDGS UNSPADR12 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable primary indicators, SEVEN+I HLDGS is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TESCO PLC and SEVEN+I HLDGS

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

The idea behind TESCO PLC ADR1 and SEVENI HLDGS UNSPADR12 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.