Correlation Between PepsiCo and NL Industries
Can any of the company-specific risk be diversified away by investing in both PepsiCo and NL Industries 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 NL Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and NL Industries, you can compare the effects of market volatilities on PepsiCo and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and NL Industries.
Diversification Opportunities for PepsiCo and NL Industries
-0.58 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PepsiCo and NL Industries is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of PepsiCo i.e., PepsiCo and NL Industries go up and down completely randomly.
Pair Corralation between PepsiCo and NL Industries
Considering the 90-day investment horizon PepsiCo is expected to under-perform the NL Industries. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 3.32 times less risky than NL Industries. The stock trades about -0.16 of its potential returns per unit of risk. The NL Industries is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 782.00 in NL Industries on August 29, 2024 and sell it today you would earn a total of 15.00 from holding NL Industries or generate 1.92% 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. NL Industries
Performance |
| Timeline |
| PepsiCo |
| NL Industries |
PepsiCo and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and NL Industries
The main advantage of trading using opposite PepsiCo and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Other Complementary Tools
| Transaction History View history of all your transactions and understand their impact on performance | |
| Watchlist Optimization Optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |