Correlation Between J Sainsbury and Ocado Group

Can any of the company-specific risk be diversified away by investing in both J Sainsbury and Ocado Group 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 J Sainsbury and Ocado Group into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between J Sainsbury plc and Ocado Group PLC, you can compare the effects of market volatilities on J Sainsbury and Ocado Group 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 J Sainsbury with a short position of Ocado Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of J Sainsbury and Ocado Group.

Diversification Opportunities for J Sainsbury and Ocado Group

0.09

Correlation Coefficient

J Sainsbury  Ocado Group

Significant diversification

The 3 months correlation between JSNSF and Ocado is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding J Sainsbury plc and Ocado Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocado Group PLC and J Sainsbury 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 J Sainsbury plc are associated (or correlated) with Ocado Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocado Group PLC has no effect on the direction of J Sainsbury i.e., J Sainsbury and Ocado Group go up and down completely randomly.

Pair Corralation between J Sainsbury and Ocado Group

Assuming the 90 days horizon J Sainsbury plc is expected to generate 2.04 times more return on investment than Ocado Group. However, J Sainsbury is 2.04 times more volatile than Ocado Group PLC. It trades about 0.06 of its potential returns per unit of risk. Ocado Group PLC is currently generating about -0.08 per unit of risk. If you would invest  315.00  in J Sainsbury plc on December 1, 2024 and sell it today you would earn a total of  35.00  from holding J Sainsbury plc or generate 11.11% return on investment over 90 days.

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

J Sainsbury plc  vs.  Ocado Group PLC

J Sainsbury plc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in J Sainsbury plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, J Sainsbury reported solid returns over the last few months and may actually be approaching a breakup point.

Ocado Group PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ocado Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with J Sainsbury and Ocado Group

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

The idea behind J Sainsbury plc and Ocado Group PLC 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.