Correlation Between Worldwide Healthcare and Tesco PLC

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

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

Diversification Opportunities for Worldwide Healthcare and Tesco PLC

0.42

Correlation Coefficient

Worldwide Healthcare  Tesco PLC

Very weak diversification

The 3 months correlation between Worldwide and Tesco is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Worldwide Healthcare Trust and Tesco PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tesco PLC and Worldwide Healthcare 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 Worldwide Healthcare Trust 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 Worldwide Healthcare i.e., Worldwide Healthcare and Tesco PLC go up and down completely randomly.

Pair Corralation between Worldwide Healthcare and Tesco PLC

Assuming the 90 days trading horizon Worldwide Healthcare is expected to generate 28.69 times less return on investment than Tesco PLC. But when comparing it to its historical volatility, Worldwide Healthcare Trust is 1.05 times less risky than Tesco PLC. It trades about 0.01 of its potential returns per unit of risk. Tesco PLC is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  32,153  in Tesco PLC on April 1, 2025 and sell it today you would earn a total of  7,937  from holding Tesco PLC or generate 24.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Worldwide Healthcare Trust  vs.  Tesco PLC

Worldwide Healthcare

Risk-Adjusted Performance

Weak

Over the last 90 days Worldwide Healthcare Trust has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Worldwide Healthcare is not utilizing all of its potentials. The latest 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 unsteady basic indicators, Tesco PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Worldwide Healthcare and Tesco PLC

The main advantage of trading using opposite Worldwide Healthcare and Tesco PLC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Worldwide Healthcare 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 Worldwide Healthcare Trust 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.