Correlation Between PepsiCo and Aluminum
Can any of the company-specific risk be diversified away by investing in both PepsiCo and Aluminum 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 PepsiCo and Aluminum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Aluminum of, you can compare the effects of market volatilities on PepsiCo and Aluminum 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 PepsiCo with a short position of Aluminum. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Aluminum.
Diversification Opportunities for PepsiCo and Aluminum
Good diversification
The 3 months correlation between PepsiCo and Aluminum is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Aluminum of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aluminum and PepsiCo 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 PepsiCo are associated (or correlated) with Aluminum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aluminum has no effect on the direction of PepsiCo i.e., PepsiCo and Aluminum go up and down completely randomly.
Pair Corralation between PepsiCo and Aluminum
Assuming the 90 days trading horizon PepsiCo is expected to generate 49.17 times less return on investment than Aluminum. But when comparing it to its historical volatility, PepsiCo is 2.48 times less risky than Aluminum. It trades about 0.01 of its potential returns per unit of risk. Aluminum of is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 56.00 in Aluminum of on October 31, 2024 and sell it today you would earn a total of 4.00 from holding Aluminum of or generate 7.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.24% |
| Values | Daily Returns |
PepsiCo vs. Aluminum of
Performance |
| Timeline |
| PepsiCo |
| Aluminum |
PepsiCo and Aluminum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Aluminum
The main advantage of trading using opposite PepsiCo and Aluminum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Aluminum 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 Aluminum will offset losses from the drop in Aluminum's long position.| PepsiCo vs. Gladstone Investment | PepsiCo vs. New Residential Investment | PepsiCo vs. Daito Trust Construction | PepsiCo vs. Scottish Mortgage Investment |
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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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