Correlation Between PepsiCo and United Rentals
Can any of the company-specific risk be diversified away by investing in both PepsiCo and United Rentals 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 United Rentals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and United Rentals, you can compare the effects of market volatilities on PepsiCo and United Rentals 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 United Rentals. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and United Rentals.
Diversification Opportunities for PepsiCo and United Rentals
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between PepsiCo and United is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and United Rentals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Rentals 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 United Rentals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Rentals has no effect on the direction of PepsiCo i.e., PepsiCo and United Rentals go up and down completely randomly.
Pair Corralation between PepsiCo and United Rentals
Considering the 90-day investment horizon PepsiCo is expected to under-perform the United Rentals. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.29 times less risky than United Rentals. The stock trades about -0.06 of its potential returns per unit of risk. The United Rentals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 81,127 in United Rentals on September 1, 2024 and sell it today you would earn a total of 5,473 from holding United Rentals or generate 6.75% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. United Rentals
Performance |
| Timeline |
| PepsiCo |
| United Rentals |
PepsiCo and United Rentals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and United Rentals
The main advantage of trading using opposite PepsiCo and United Rentals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, United Rentals 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 United Rentals will offset losses from the drop in United Rentals' long position.| PepsiCo vs. Coca Cola Femsa SAB | PepsiCo vs. National Beverage Corp | PepsiCo vs. Embotelladora Andina SA |
| United Rentals vs. HE Equipment Services | United Rentals vs. GATX Corporation | United Rentals vs. McGrath RentCorp | United Rentals vs. Alta Equipment 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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