Correlation Between PepsiCo and CECO Environmental
Can any of the company-specific risk be diversified away by investing in both PepsiCo and CECO Environmental 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 CECO Environmental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and CECO Environmental Corp, you can compare the effects of market volatilities on PepsiCo and CECO Environmental 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 CECO Environmental. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and CECO Environmental.
Diversification Opportunities for PepsiCo and CECO Environmental
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between PepsiCo and CECO is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and CECO Environmental Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CECO Environmental 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 CECO Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CECO Environmental Corp has no effect on the direction of PepsiCo i.e., PepsiCo and CECO Environmental go up and down completely randomly.
Pair Corralation between PepsiCo and CECO Environmental
Considering the 90-day investment horizon PepsiCo is expected to under-perform the CECO Environmental. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 3.1 times less risky than CECO Environmental. The stock trades about -0.03 of its potential returns per unit of risk. The CECO Environmental Corp is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,324 in CECO Environmental Corp on September 12, 2024 and sell it today you would earn a total of 2,042 from holding CECO Environmental Corp or generate 154.23% 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. CECO Environmental Corp
Performance |
| Timeline |
| PepsiCo |
| CECO Environmental Corp |
PepsiCo and CECO Environmental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and CECO Environmental
The main advantage of trading using opposite PepsiCo and CECO Environmental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, CECO Environmental 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 CECO Environmental will offset losses from the drop in CECO Environmental's long position.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| CECO Environmental vs. Federal Signal | CECO Environmental vs. Zurn Elkay Water | CECO Environmental vs. Fuel Tech | CECO Environmental vs. Energy Recovery |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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