Correlation Between Tesco PLC and Target

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Can any of the company-specific risk be diversified away by investing in both Tesco PLC and Target 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 Target into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesco PLC and Target, you can compare the effects of market volatilities on Tesco PLC and Target 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 Target. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesco PLC and Target.

Diversification Opportunities for Tesco PLC and Target

0.37
  Correlation Coefficient

Weak diversification

The 3 months correlation between Tesco and Target is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and Target in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Target 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 Target. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Target has no effect on the direction of Tesco PLC i.e., Tesco PLC and Target go up and down completely randomly.

Pair Corralation between Tesco PLC and Target

Assuming the 90 days horizon Tesco PLC is expected to generate 2.09 times more return on investment than Target. However, Tesco PLC is 2.09 times more volatile than Target. It trades about 0.06 of its potential returns per unit of risk. Target is currently generating about -0.18 per unit of risk. If you would invest  351.00  in Tesco PLC on February 5, 2024 and sell it today you would earn a total of  16.00  from holding Tesco PLC or generate 4.56% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy97.67%
ValuesDaily Returns

Tesco PLC  vs.  Target

 Performance 
       Timeline  
Tesco PLC 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Tesco PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental indicators, Tesco PLC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.
Target 

Risk-Adjusted Performance

7 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Target are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting technical and fundamental indicators, Target may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Tesco PLC and Target Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Tesco PLC and Target

The main advantage of trading using opposite Tesco PLC and Target positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesco PLC position performs unexpectedly, Target 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 Target will offset losses from the drop in Target's long position.
The idea behind Tesco PLC and Target 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.
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.

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