Correlation Between PepsiCo and Scandinavian Tobacco
Can any of the company-specific risk be diversified away by investing in both PepsiCo and Scandinavian Tobacco 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 Scandinavian Tobacco into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Scandinavian Tobacco Group, you can compare the effects of market volatilities on PepsiCo and Scandinavian Tobacco 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 Scandinavian Tobacco. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Scandinavian Tobacco.
Diversification Opportunities for PepsiCo and Scandinavian Tobacco
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between PepsiCo and Scandinavian is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Scandinavian Tobacco Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scandinavian Tobacco 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 Scandinavian Tobacco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scandinavian Tobacco has no effect on the direction of PepsiCo i.e., PepsiCo and Scandinavian Tobacco go up and down completely randomly.
Pair Corralation between PepsiCo and Scandinavian Tobacco
Considering the 90-day investment horizon PepsiCo is expected to generate 0.95 times more return on investment than Scandinavian Tobacco. However, PepsiCo is 1.05 times less risky than Scandinavian Tobacco. It trades about -0.17 of its potential returns per unit of risk. Scandinavian Tobacco Group is currently generating about -0.28 per unit of risk. If you would invest 16,984 in PepsiCo on August 29, 2024 and sell it today you would lose (768.00) from holding PepsiCo or give up 4.52% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
PepsiCo vs. Scandinavian Tobacco Group
Performance |
| Timeline |
| PepsiCo |
| Scandinavian Tobacco |
PepsiCo and Scandinavian Tobacco Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Scandinavian Tobacco
The main advantage of trading using opposite PepsiCo and Scandinavian Tobacco positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Scandinavian Tobacco 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 Scandinavian Tobacco will offset losses from the drop in Scandinavian Tobacco's long position.| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Philip Morris International |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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