Correlation Between Constellation Brands and PepsiCo

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

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

Diversification Opportunities for Constellation Brands and PepsiCo

-0.2

Correlation Coefficient

Constellation Brands  PepsiCo

Good diversification

The 3 months correlation between Constellation and PepsiCo is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Constellation Brands Class and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Constellation Brands 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 Constellation Brands Class are associated (or correlated) with PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of Constellation Brands i.e., Constellation Brands and PepsiCo go up and down completely randomly.

Pair Corralation between Constellation Brands and PepsiCo

Considering the 90-day investment horizon Constellation Brands Class is expected to under-perform the PepsiCo. In addition to that, Constellation Brands is 1.14 times more volatile than PepsiCo. It trades about -0.09 of its total potential returns per unit of risk. PepsiCo is currently generating about 0.08 per unit of volatility. If you would invest  13,048  in PepsiCo on May 7, 2025 and sell it today you would earn a total of  908.00  from holding PepsiCo or generate 6.96% return on investment over 90 days.

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

Constellation Brands Class  vs.  PepsiCo

Constellation Brands

Risk-Adjusted Performance

Very Weak

Over the last 90 days Constellation Brands Class has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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.

Pair Trading with Constellation Brands and PepsiCo

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

The idea behind Constellation Brands Class and PepsiCo 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 CEOs Directory module to screen CEOs from public companies around the world.