Correlation Between PepsiCo and BBB Foods
Can any of the company-specific risk be diversified away by investing in both PepsiCo and BBB Foods 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 BBB Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and BBB Foods, you can compare the effects of market volatilities on PepsiCo and BBB Foods 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 BBB Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and BBB Foods.
Diversification Opportunities for PepsiCo and BBB Foods
Very good diversification
The 3 months correlation between PepsiCo and BBB is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and BBB Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BBB Foods 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 BBB Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BBB Foods has no effect on the direction of PepsiCo i.e., PepsiCo and BBB Foods go up and down completely randomly.
Pair Corralation between PepsiCo and BBB Foods
Considering the 90-day investment horizon PepsiCo is expected to generate 30.64 times less return on investment than BBB Foods. But when comparing it to its historical volatility, PepsiCo is 3.11 times less risky than BBB Foods. It trades about 0.01 of its potential returns per unit of risk. BBB Foods is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,750 in BBB Foods on September 1, 2024 and sell it today you would earn a total of 1,072 from holding BBB Foods or generate 61.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 76.21% |
| Values | Daily Returns |
PepsiCo vs. BBB Foods
Performance |
| Timeline |
| PepsiCo |
| BBB Foods |
PepsiCo and BBB Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and BBB Foods
The main advantage of trading using opposite PepsiCo and BBB Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, BBB Foods 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 BBB Foods will offset losses from the drop in BBB Foods' long position.| PepsiCo vs. Coca Cola Femsa SAB | PepsiCo vs. Embotelladora Andina SA | PepsiCo vs. National Beverage Corp | PepsiCo vs. Embotelladora Andina SA |
| BBB Foods vs. Ingles Markets Incorporated | BBB Foods vs. Sendas Distribuidora SA | BBB Foods vs. Grocery Outlet Holding | BBB Foods vs. Ocado Group plc |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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