Correlation Between PepsiCo and Corby Spirit

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

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

Diversification Opportunities for PepsiCo and Corby Spirit

-0.15

Correlation Coefficient

PepsiCo  Corby Spirit

Good diversification

The 3 months correlation between PepsiCo and Corby is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Corby Spirit and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corby Spirit and PepsiCo 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 PepsiCo are associated (or correlated) with Corby Spirit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corby Spirit has no effect on the direction of PepsiCo i.e., PepsiCo and Corby Spirit go up and down completely randomly.

Pair Corralation between PepsiCo and Corby Spirit

Considering the 90-day investment horizon PepsiCo is expected to generate 0.59 times more return on investment than Corby Spirit. However, PepsiCo is 1.7 times less risky than Corby Spirit. It trades about 0.02 of its potential returns per unit of risk. Corby Spirit and is currently generating about -0.03 per unit of risk. If you would invest  16,264  in PepsiCo on January 31, 2024 and sell it today you would earn a total of  1,350  from holding PepsiCo or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	83.4%
Values	Daily Returns

PepsiCo  vs.  Corby Spirit and

PepsiCo

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PepsiCo are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Corby Spirit

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Corby Spirit and are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable fundamental drivers, Corby Spirit is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PepsiCo and Corby Spirit

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

The idea behind PepsiCo and Corby Spirit and 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 Global Correlations module to find global opportunities by holding instruments from different markets.