Correlation Between PepsiCo and Air Products
Can any of the company-specific risk be diversified away by investing in both PepsiCo and Air Products 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 Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Air Products and, you can compare the effects of market volatilities on PepsiCo and Air Products 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 Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Air Products.
Diversification Opportunities for PepsiCo and Air Products
-0.56 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PepsiCo and Air is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products 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 Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of PepsiCo i.e., PepsiCo and Air Products go up and down completely randomly.
Pair Corralation between PepsiCo and Air Products
Considering the 90-day investment horizon PepsiCo is expected to under-perform the Air Products. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 1.73 times less risky than Air Products. The stock trades about -0.02 of its potential returns per unit of risk. The Air Products and is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 26,745 in Air Products and on September 1, 2024 and sell it today you would earn a total of 6,688 from holding Air Products and or generate 25.01% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. Air Products and
Performance |
| Timeline |
| PepsiCo |
| Air Products |
PepsiCo and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Air Products
The main advantage of trading using opposite PepsiCo and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| PepsiCo vs. Coca Cola Femsa SAB | PepsiCo vs. National Beverage Corp | PepsiCo vs. Embotelladora Andina SA |
| Air Products vs. PPG Industries | Air Products vs. Ecolab Inc | Air Products vs. Sherwin Williams Co | Air Products vs. LyondellBasell Industries NV |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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