Correlation Between Tesco PLC and BJs Wholesale
Can any of the company-specific risk be diversified away by investing in both Tesco PLC and BJs Wholesale 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 BJs Wholesale into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Tesco PLC and BJs Wholesale Club, you can compare the effects of market volatilities on Tesco PLC and BJs Wholesale 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 BJs Wholesale. Check out your portfolio center. Please also check ongoing floating volatility patterns of Tesco PLC and BJs Wholesale.
Diversification Opportunities for Tesco PLC and BJs Wholesale
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Tesco and BJs is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club 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 BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of Tesco PLC i.e., Tesco PLC and BJs Wholesale go up and down completely randomly.
Pair Corralation between Tesco PLC and BJs Wholesale
Assuming the 90 days horizon Tesco PLC is expected to generate 1.82 times more return on investment than BJs Wholesale. However, Tesco PLC is 1.82 times more volatile than BJs Wholesale Club. It trades about 0.12 of its potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.0 per unit of risk. If you would invest 345.00 in Tesco PLC on February 7, 2024 and sell it today you would earn a total of 22.00 from holding Tesco PLC or generate 6.38% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 90.91% |
Values | Daily Returns |
Tesco PLC vs. BJs Wholesale Club
Performance |
Timeline |
Tesco PLC |
BJs Wholesale Club |
Tesco PLC and BJs Wholesale Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Tesco PLC and BJs Wholesale
The main advantage of trading using opposite Tesco PLC and BJs Wholesale positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Tesco PLC position performs unexpectedly, BJs Wholesale 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 BJs Wholesale will offset losses from the drop in BJs Wholesale's long position.Tesco PLC vs. Natural Grocers by | Tesco PLC vs. Grocery Outlet Holding | Tesco PLC vs. Village Super Market | Tesco PLC vs. Ingles Markets Incorporated |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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