Correlation Between CP ALL and Tesco PLC

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

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

Diversification Opportunities for CP ALL and Tesco PLC

0.32

Correlation Coefficient

CP ALL  Tesco PLC

Weak diversification

The 3 months correlation between CVPUF and Tesco is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding CP ALL Public and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC and CP ALL 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 CP ALL Public 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 CP ALL i.e., CP ALL and Tesco PLC go up and down completely randomly.

Pair Corralation between CP ALL and Tesco PLC

Assuming the 90 days horizon CP ALL is expected to generate 1.71 times less return on investment than Tesco PLC. In addition to that, CP ALL is 1.67 times more volatile than Tesco PLC. It trades about 0.03 of its total potential returns per unit of risk. Tesco PLC is currently generating about 0.07 per unit of volatility. If you would invest  1,090  in Tesco PLC on February 5, 2024 and sell it today you would earn a total of  40.00  from holding Tesco PLC or generate 3.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.67%
Values	Daily Returns

CP ALL Public  vs.  Tesco PLC

CP ALL Public

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CP ALL Public are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, CP ALL is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Tesco PLC

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Tesco PLC are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Tesco PLC is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CP ALL and Tesco PLC

The main advantage of trading using opposite CP ALL and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CP ALL 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 CP ALL Public 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.