Correlation Between Tesco PLC and Liberty Media

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

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

Diversification Opportunities for Tesco PLC and Liberty Media

0.86

Correlation Coefficient

Tesco PLC  Liberty Media

Very poor diversification

The 3 months correlation between Tesco and Liberty is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Tesco PLC and Liberty Media Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Liberty Media Corp 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 Liberty Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Liberty Media Corp has no effect on the direction of Tesco PLC i.e., Tesco PLC and Liberty Media go up and down completely randomly.

Pair Corralation between Tesco PLC and Liberty Media

Assuming the 90 days trading horizon Tesco PLC is expected to generate 0.75 times more return on investment than Liberty Media. However, Tesco PLC is 1.32 times less risky than Liberty Media. It trades about 0.33 of its potential returns per unit of risk. Liberty Media Corp is currently generating about 0.18 per unit of risk. If you would invest  34,871  in Tesco PLC on April 25, 2025 and sell it today you would earn a total of  7,929  from holding Tesco PLC or generate 22.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Tesco PLC  vs.  Liberty Media Corp

Tesco PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Tesco PLC are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Tesco PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Liberty Media Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liberty Media Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Liberty Media unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Tesco PLC and Liberty Media

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

The idea behind Tesco PLC and Liberty Media Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.