Correlation Between Brunswick and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Brunswick 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 Brunswick and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Brunswick and PepsiCo, you can compare the effects of market volatilities on Brunswick 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 Brunswick with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Brunswick and PepsiCo.
Diversification Opportunities for Brunswick and PepsiCo
Significant diversification
The 3 months correlation between Brunswick and PepsiCo is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Brunswick and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Brunswick 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 Brunswick 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 Brunswick i.e., Brunswick and PepsiCo go up and down completely randomly.
Pair Corralation between Brunswick and PepsiCo
Allowing for the 90-day total investment horizon Brunswick is expected to generate 2.14 times more return on investment than PepsiCo. However, Brunswick is 2.14 times more volatile than PepsiCo. It trades about 0.02 of its potential returns per unit of risk. PepsiCo is currently generating about -0.01 per unit of risk. If you would invest 6,754 in Brunswick on September 12, 2024 and sell it today you would earn a total of 858.00 from holding Brunswick or generate 12.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Brunswick vs. PepsiCo
Performance |
| Timeline |
| Brunswick |
| PepsiCo |
Brunswick and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Brunswick and PepsiCo
The main advantage of trading using opposite Brunswick and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brunswick 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.| Brunswick vs. MCBC Holdings | Brunswick vs. Marine Products | Brunswick vs. Winnebago Industries | Brunswick vs. LCI Industries |
| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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