Correlation Between TESCO PLC and SEVENI HLDGS

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Can any of the company-specific risk be diversified away by investing in both TESCO PLC and SEVENI 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 SEVENI HLDGS into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between TESCO PLC LS 0633333 and SEVENI HLDGS UNSPADR12, you can compare the effects of market volatilities on TESCO PLC and SEVENI 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 SEVENI HLDGS. Check out your portfolio center. Please also check ongoing floating volatility patterns of TESCO PLC and SEVENI HLDGS.

Diversification Opportunities for TESCO PLC and SEVENI HLDGS

0.38
  Correlation Coefficient

Weak diversification

The 3 months correlation between TESCO and SEVENI is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding TESCO PLC LS 0633333 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 LS 0633333 are associated (or correlated) with SEVENI 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 SEVENI HLDGS go up and down completely randomly.

Pair Corralation between TESCO PLC and SEVENI HLDGS

Assuming the 90 days trading horizon TESCO PLC LS 0633333 is expected to under-perform the SEVENI HLDGS. But the stock apears to be less risky and, when comparing its historical volatility, TESCO PLC LS 0633333 is 1.21 times less risky than SEVENI HLDGS. The stock trades about -0.09 of its potential returns per unit of risk. The SEVENI HLDGS UNSPADR12 is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,240  in SEVENI HLDGS UNSPADR12 on December 27, 2024 and sell it today you would earn a total of  60.00  from holding SEVENI HLDGS UNSPADR12 or generate 4.84% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

TESCO PLC LS 0633333  vs.  SEVENI HLDGS UNSPADR12

 Performance 
       Timeline  
TESCO PLC LS 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days TESCO PLC LS 0633333 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.
SEVENI HLDGS UNSPADR12 

Risk-Adjusted Performance

Insignificant

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in SEVENI HLDGS UNSPADR12 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady primary indicators, SEVENI HLDGS may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TESCO PLC and SEVENI HLDGS Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TESCO PLC and SEVENI HLDGS

The main advantage of trading using opposite TESCO PLC and SEVENI HLDGS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TESCO PLC position performs unexpectedly, SEVENI 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 SEVENI HLDGS will offset losses from the drop in SEVENI HLDGS's long position.
The idea behind TESCO PLC LS 0633333 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 Transaction History module to view history of all your transactions and understand their impact on performance.

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