Correlation Between PepsiCo and Hooker Furniture
Can any of the company-specific risk be diversified away by investing in both PepsiCo and Hooker Furniture 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 Hooker Furniture into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Hooker Furniture, you can compare the effects of market volatilities on PepsiCo and Hooker Furniture 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 Hooker Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Hooker Furniture.
Diversification Opportunities for PepsiCo and Hooker Furniture
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PepsiCo and Hooker is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Hooker Furniture in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hooker Furniture 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 Hooker Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hooker Furniture has no effect on the direction of PepsiCo i.e., PepsiCo and Hooker Furniture go up and down completely randomly.
Pair Corralation between PepsiCo and Hooker Furniture
Considering the 90-day investment horizon PepsiCo is expected to under-perform the Hooker Furniture. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.8 times less risky than Hooker Furniture. The stock trades about -0.15 of its potential returns per unit of risk. The Hooker Furniture is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,605 in Hooker Furniture on August 28, 2024 and sell it today you would earn a total of 306.00 from holding Hooker Furniture or generate 19.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. Hooker Furniture
Performance |
| Timeline |
| PepsiCo |
| Hooker Furniture |
PepsiCo and Hooker Furniture Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Hooker Furniture
The main advantage of trading using opposite PepsiCo and Hooker Furniture positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Hooker Furniture 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 Hooker Furniture will offset losses from the drop in Hooker Furniture's long position.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| Hooker Furniture vs. Willis Lease Finance | Hooker Furniture vs. Rocky Brands | Hooker Furniture vs. First Business Financial |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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