Correlation Between Eq Energy and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Eq Energy 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 Eq Energy and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eq Energy Drink and PepsiCo, you can compare the effects of market volatilities on Eq Energy 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 Eq Energy with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eq Energy and PepsiCo.
Diversification Opportunities for Eq Energy and PepsiCo
Poor diversification
The 3 months correlation between EQLB and PepsiCo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eq Energy Drink and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Eq Energy 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 Eq Energy Drink 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 Eq Energy i.e., Eq Energy and PepsiCo go up and down completely randomly.
Pair Corralation between Eq Energy and PepsiCo
Given the investment horizon of 90 days Eq Energy Drink is expected to under-perform the PepsiCo. In addition to that, Eq Energy is 14.38 times more volatile than PepsiCo. It trades about -0.06 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.08 per unit of volatility. If you would invest 16,621 in PepsiCo on August 31, 2024 and sell it today you would lose (349.00) 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 |
Eq Energy Drink vs. PepsiCo
Performance |
| Timeline |
| Eq Energy Drink |
| PepsiCo |
Eq Energy and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Eq Energy and PepsiCo
The main advantage of trading using opposite Eq Energy and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eq Energy 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.| Eq Energy vs. PepsiCo | Eq Energy vs. Coca Cola Consolidated | Eq Energy vs. Monster Beverage Corp | Eq Energy vs. Celsius Holdings |
| PepsiCo vs. Monster Beverage Corp | PepsiCo vs. RLJ Lodging Trust | PepsiCo vs. Aquagold International | PepsiCo vs. Stepstone Group |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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