Correlation Between PepsiCo and Where Food

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

By analyzing existing cross correlation between PepsiCo and Where Food Comes, you can compare the effects of market volatilities on PepsiCo and Where Food 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 Where Food. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Where Food.

Diversification Opportunities for PepsiCo and Where Food

-0.28

Correlation Coefficient

PepsiCo  Where Food

Very good diversification

The 3 months correlation between PepsiCo and Where is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Where Food Comes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Where Food Comes 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 Where Food. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Where Food Comes has no effect on the direction of PepsiCo i.e., PepsiCo and Where Food go up and down completely randomly.

Pair Corralation between PepsiCo and Where Food

Considering the 90-day investment horizon PepsiCo is expected to generate 0.34 times more return on investment than Where Food. However, PepsiCo is 2.93 times less risky than Where Food. It trades about 0.14 of its potential returns per unit of risk. Where Food Comes is currently generating about 0.01 per unit of risk. If you would invest  16,459  in PepsiCo on January 31, 2024 and sell it today you would earn a total of  1,155  from holding PepsiCo or generate 7.02% return on investment over 90 days.

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

PepsiCo  vs.  Where Food Comes

PepsiCo

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PepsiCo are ranked lower than 4 (%) 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.

Where Food Comes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Where Food Comes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PepsiCo and Where Food

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

The idea behind PepsiCo and Where Food Comes 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.