Correlation Between PepsiCo and BTU Metals
Can any of the company-specific risk be diversified away by investing in both PepsiCo and BTU Metals 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 BTU Metals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and BTU Metals Corp, you can compare the effects of market volatilities on PepsiCo and BTU Metals 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 BTU Metals. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and BTU Metals.
Diversification Opportunities for PepsiCo and BTU Metals
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between PepsiCo and BTU is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and BTU Metals Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BTU Metals Corp 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 BTU Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BTU Metals Corp has no effect on the direction of PepsiCo i.e., PepsiCo and BTU Metals go up and down completely randomly.
Pair Corralation between PepsiCo and BTU Metals
Considering the 90-day investment horizon PepsiCo is expected to under-perform the BTU Metals. In addition to that, PepsiCo is 2.72 times more volatile than BTU Metals Corp. It trades about -0.13 of its total potential returns per unit of risk. BTU Metals Corp is currently generating about -0.21 per unit of volatility. If you would invest 2.05 in BTU Metals Corp on September 12, 2024 and sell it today you would lose (0.04) from holding BTU Metals Corp or give up 1.95% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. BTU Metals Corp
Performance |
| Timeline |
| PepsiCo |
| BTU Metals Corp |
PepsiCo and BTU Metals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and BTU Metals
The main advantage of trading using opposite PepsiCo and BTU Metals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, BTU Metals 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 BTU Metals will offset losses from the drop in BTU Metals' long position.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| BTU Metals vs. Celsius Holdings | BTU Metals vs. PepsiCo | BTU Metals vs. Iridium Communications | BTU Metals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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