Correlation Between Ocado Group and Tesco PLC

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

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

Diversification Opportunities for Ocado Group and Tesco PLC

0.45

Correlation Coefficient

Ocado Group  Tesco PLC

Very weak diversification

The 3 months correlation between Ocado and Tesco is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Ocado Group plc and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC and Ocado Group 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 Ocado Group plc 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 has no effect on the direction of Ocado Group i.e., Ocado Group and Tesco PLC go up and down completely randomly.

Pair Corralation between Ocado Group and Tesco PLC

Assuming the 90 days horizon Ocado Group plc is expected to under-perform the Tesco PLC. But the pink sheet apears to be less risky and, when comparing its historical volatility, Ocado Group plc is 1.19 times less risky than Tesco PLC. The pink sheet trades about -0.18 of its potential returns per unit of risk. The Tesco PLC is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  435.00  in Tesco PLC on September 27, 2024 and sell it today you would earn a total of  40.00  from holding Tesco PLC or generate 9.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Ocado Group plc  vs.  Tesco PLC

Ocado Group plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocado Group plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Tesco PLC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ocado Group and Tesco PLC

The main advantage of trading using opposite Ocado Group and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ocado Group 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 Ocado Group plc and Tesco 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.