Correlation Between Tesco PLC and J Sainsbury

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

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

Diversification Opportunities for Tesco PLC and J Sainsbury

0.38

Correlation Coefficient

Tesco PLC  J Sainsbury

Weak diversification

The 3 months correlation between Tesco and JSNSF is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and J Sainsbury plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on J Sainsbury plc 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 J Sainsbury. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of J Sainsbury plc has no effect on the direction of Tesco PLC i.e., Tesco PLC and J Sainsbury go up and down completely randomly.

Pair Corralation between Tesco PLC and J Sainsbury

Assuming the 90 days horizon Tesco PLC is expected to under-perform the J Sainsbury. But the pink sheet apears to be less risky and, when comparing its historical volatility, Tesco PLC is 1.98 times less risky than J Sainsbury. The pink sheet trades about -0.03 of its potential returns per unit of risk. The J Sainsbury plc is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  342.00  in J Sainsbury plc on December 29, 2024 and sell it today you would lose (2.00) from holding J Sainsbury plc or give up 0.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Tesco PLC  vs.  J Sainsbury plc

Tesco PLC

Risk-Adjusted Performance

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

J Sainsbury plc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in J Sainsbury plc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, J Sainsbury may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Tesco PLC and J Sainsbury

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

The idea behind Tesco PLC and J Sainsbury 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.

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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.