Correlation Between AM EAGLE and PepsiCo
Can any of the company-specific risk be diversified away by investing in both AM EAGLE 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 AM EAGLE and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AM EAGLE OUTFITTERS and PepsiCo, you can compare the effects of market volatilities on AM EAGLE 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 AM EAGLE with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of AM EAGLE and PepsiCo.
Diversification Opportunities for AM EAGLE and PepsiCo
Poor diversification
The 3 months correlation between AFG and PepsiCo is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding AM EAGLE OUTFITTERS and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and AM EAGLE 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 AM EAGLE OUTFITTERS 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 AM EAGLE i.e., AM EAGLE and PepsiCo go up and down completely randomly.
Pair Corralation between AM EAGLE and PepsiCo
Assuming the 90 days trading horizon AM EAGLE OUTFITTERS is expected to under-perform the PepsiCo. In addition to that, AM EAGLE is 2.67 times more volatile than PepsiCo. It trades about -0.03 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.01 per unit of volatility. If you would invest 14,989 in PepsiCo on September 29, 2024 and sell it today you would lose (315.00) from holding PepsiCo or give up 2.1% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
AM EAGLE OUTFITTERS vs. PepsiCo
Performance |
| Timeline |
| AM EAGLE OUTFITTERS |
| PepsiCo |
AM EAGLE and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with AM EAGLE and PepsiCo
The main advantage of trading using opposite AM EAGLE and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AM EAGLE 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.| AM EAGLE vs. PennantPark Investment | AM EAGLE vs. SLR Investment Corp | AM EAGLE vs. CITY OFFICE REIT | AM EAGLE vs. Japan Asia Investment |
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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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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