Correlation Between BP PLC and Tesco PLC

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

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

Diversification Opportunities for BP PLC and Tesco PLC

0.0

Correlation Coefficient

BP PLC  Tesco PLC

Pay attention - limited upside

The 3 months correlation between BP PLC and Tesco is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding BP PLC and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC and BP 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 BP 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 BP PLC i.e., BP PLC and Tesco PLC go up and down completely randomly.

Pair Corralation between BP PLC and Tesco PLC

If you would invest  38,250  in Tesco PLC on March 30, 2025 and sell it today you would earn a total of  1,840  from holding Tesco PLC or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

BP PLC  vs.  Tesco PLC

BP PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days BP PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, BP PLC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Tesco PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesco PLC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Tesco PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BP PLC and Tesco PLC

The main advantage of trading using opposite BP PLC and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP PLC 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 BP 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.

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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.