Correlation Between PepsiCo and Dominos Pizza
Can any of the company-specific risk be diversified away by investing in both PepsiCo and Dominos Pizza 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 Dominos Pizza into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Dominos Pizza, you can compare the effects of market volatilities on PepsiCo and Dominos Pizza 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 Dominos Pizza. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Dominos Pizza.
Diversification Opportunities for PepsiCo and Dominos Pizza
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PepsiCo and Dominos is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Dominos Pizza in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominos Pizza 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 Dominos Pizza. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominos Pizza has no effect on the direction of PepsiCo i.e., PepsiCo and Dominos Pizza go up and down completely randomly.
Pair Corralation between PepsiCo and Dominos Pizza
Considering the 90-day investment horizon PepsiCo is expected to under-perform the Dominos Pizza. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 1.55 times less risky than Dominos Pizza. The stock trades about -0.08 of its potential returns per unit of risk. The Dominos Pizza is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 42,998 in Dominos Pizza on September 4, 2024 and sell it today you would earn a total of 3,620 from holding Dominos Pizza or generate 8.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. Dominos Pizza
Performance |
| Timeline |
| PepsiCo |
| Dominos Pizza |
PepsiCo and Dominos Pizza Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Dominos Pizza
The main advantage of trading using opposite PepsiCo and Dominos Pizza positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Dominos Pizza 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 Dominos Pizza will offset losses from the drop in Dominos Pizza's long position.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| Dominos Pizza vs. Hyatt Hotels | Dominos Pizza vs. Smart Share Global | Dominos Pizza vs. Sweetgreen | Dominos Pizza vs. Wyndham Hotels Resorts |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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