Correlation Between Tesco PLC and Albertsons Companies

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

By analyzing existing cross correlation between Tesco PLC and Albertsons Companies, you can compare the effects of market volatilities on Tesco PLC and Albertsons Companies 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 Albertsons Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesco PLC and Albertsons Companies.

Diversification Opportunities for Tesco PLC and Albertsons Companies

-0.49

Correlation Coefficient

Tesco PLC  Albertsons Companies

Very good diversification

The 3 months correlation between Tesco and Albertsons is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and Albertsons Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Albertsons Companies 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 Albertsons Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Albertsons Companies has no effect on the direction of Tesco PLC i.e., Tesco PLC and Albertsons Companies go up and down completely randomly.

Pair Corralation between Tesco PLC and Albertsons Companies

Assuming the 90 days horizon Tesco PLC is expected to under-perform the Albertsons Companies. In addition to that, Tesco PLC is 2.14 times more volatile than Albertsons Companies. It trades about -0.02 of its total potential returns per unit of risk. Albertsons Companies is currently generating about 0.31 per unit of volatility. If you would invest  1,801  in Albertsons Companies on August 30, 2024 and sell it today you would earn a total of  161.00  from holding Albertsons Companies or generate 8.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Tesco PLC  vs.  Albertsons Companies

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.

Albertsons Companies

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Albertsons Companies are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental indicators, Albertsons Companies is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Tesco PLC and Albertsons Companies

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

The idea behind Tesco PLC and Albertsons Companies 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.