Correlation Between Keurig Dr and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Keurig Dr 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 Keurig Dr and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Keurig Dr Pepper and PepsiCo, you can compare the effects of market volatilities on Keurig Dr 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 Keurig Dr with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keurig Dr and PepsiCo.
Diversification Opportunities for Keurig Dr and PepsiCo
Very poor diversification
The 3 months correlation between Keurig and PepsiCo is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Keurig Dr 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 Keurig Dr Pepper 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 Keurig Dr i.e., Keurig Dr and PepsiCo go up and down completely randomly.
Pair Corralation between Keurig Dr and PepsiCo
Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the PepsiCo. In addition to that, Keurig Dr is 1.56 times more volatile than PepsiCo. It trades about -0.33 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.32 per unit of volatility. If you would invest 17,437 in PepsiCo on August 23, 2024 and sell it today you would lose (1,403) from holding PepsiCo or give up 8.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Keurig Dr Pepper vs. PepsiCo
Performance |
| Timeline |
| Keurig Dr Pepper |
| PepsiCo |
Keurig Dr and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Keurig Dr and PepsiCo
The main advantage of trading using opposite Keurig Dr and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr 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.| Keurig Dr vs. Monster Beverage Corp | Keurig Dr vs. Celsius Holdings | Keurig Dr vs. Coca Cola Femsa SAB | Keurig Dr vs. Vita Coco |
| PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Coca Cola Femsa SAB | PepsiCo vs. Vita Coco |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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