Correlation Between Coca Cola and PepsiCo
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By analyzing existing cross correlation between The Coca Cola and PepsiCo, you can compare the effects of market volatilities on Coca Cola 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 Coca Cola with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and PepsiCo.
Diversification Opportunities for Coca Cola and PepsiCo
Very weak diversification
The 3 months correlation between Coca and PepsiCo is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding The Coca Cola and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Coca Cola 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 The Coca Cola 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 Coca Cola i.e., Coca Cola and PepsiCo go up and down completely randomly.
Pair Corralation between Coca Cola and PepsiCo
Assuming the 90 days trading horizon The Coca Cola is expected to generate 1.55 times more return on investment than PepsiCo. However, Coca Cola is 1.55 times more volatile than PepsiCo. It trades about -0.13 of its potential returns per unit of risk. PepsiCo is currently generating about -0.51 per unit of risk. If you would invest 6,096 in The Coca Cola on September 27, 2024 and sell it today you would lose (144.00) from holding The Coca Cola or give up 2.36% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
The Coca Cola vs. PepsiCo
Performance |
| Timeline |
| Coca Cola |
| PepsiCo |
Coca Cola and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coca Cola and PepsiCo
The main advantage of trading using opposite Coca Cola and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola 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 The Coca Cola 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.| PepsiCo vs. Hemisphere Energy Corp | PepsiCo vs. United Internet AG | PepsiCo vs. Iridium Communications | PepsiCo vs. Gamma Communications plc |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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