Correlation Between Naked Wines and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Naked Wines 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 Naked Wines and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Naked Wines plc and PepsiCo, you can compare the effects of market volatilities on Naked Wines 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 Naked Wines with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Naked Wines and PepsiCo.
Diversification Opportunities for Naked Wines and PepsiCo
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Naked and PepsiCo is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Naked Wines plc and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Naked Wines 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 Naked Wines plc 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 Naked Wines i.e., Naked Wines and PepsiCo go up and down completely randomly.
Pair Corralation between Naked Wines and PepsiCo
Assuming the 90 days horizon Naked Wines plc is expected to generate 8.31 times more return on investment than PepsiCo. However, Naked Wines is 8.31 times more volatile than PepsiCo. It trades about 0.03 of its potential returns per unit of risk. PepsiCo is currently generating about 0.01 per unit of risk. If you would invest 241.00 in Naked Wines plc on September 1, 2024 and sell it today you would earn a total of 30.00 from holding Naked Wines plc or generate 12.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.63% |
| Values | Daily Returns |
Naked Wines plc vs. PepsiCo
Performance |
| Timeline |
| Naked Wines plc |
| PepsiCo |
Naked Wines and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Naked Wines and PepsiCo
The main advantage of trading using opposite Naked Wines and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Naked Wines 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.| Naked Wines vs. Pernod Ricard SA | Naked Wines vs. Naked Wines plc | Naked Wines vs. Crimson Wine | Naked Wines vs. Brown Forman |
| PepsiCo vs. Coca Cola Femsa SAB | PepsiCo vs. Embotelladora Andina SA | PepsiCo vs. National Beverage Corp | PepsiCo vs. Embotelladora Andina SA |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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