Correlation Between PepsiCo and Crimson Wine

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

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

Diversification Opportunities for PepsiCo and Crimson Wine

0.47

Correlation Coefficient

PepsiCo  Crimson Wine

Very weak diversification

The 3 months correlation between PepsiCo and Crimson is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Crimson Wine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crimson Wine 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 Crimson Wine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crimson Wine has no effect on the direction of PepsiCo i.e., PepsiCo and Crimson Wine go up and down completely randomly.

Pair Corralation between PepsiCo and Crimson Wine

Considering the 90-day investment horizon PepsiCo is expected to generate 0.9 times more return on investment than Crimson Wine. However, PepsiCo is 1.12 times less risky than Crimson Wine. It trades about 0.09 of its potential returns per unit of risk. Crimson Wine is currently generating about 0.02 per unit of risk. If you would invest  12,932  in PepsiCo on May 6, 2025 and sell it today you would earn a total of  996.00  from holding PepsiCo or generate 7.7% return on investment over 90 days.

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

PepsiCo  vs.  Crimson Wine

PepsiCo

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PepsiCo are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating technical and fundamental indicators, PepsiCo may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Crimson Wine

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Crimson Wine are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Crimson Wine is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with PepsiCo and Crimson Wine

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

The idea behind PepsiCo and Crimson Wine 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.