Correlation Between PepsiCo and Westrock Coffee
Can any of the company-specific risk be diversified away by investing in both PepsiCo and Westrock Coffee 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 Westrock Coffee into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Westrock Coffee, you can compare the effects of market volatilities on PepsiCo and Westrock Coffee 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 Westrock Coffee. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Westrock Coffee.
Diversification Opportunities for PepsiCo and Westrock Coffee
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between PepsiCo and Westrock is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Westrock Coffee in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westrock Coffee 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 Westrock Coffee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westrock Coffee has no effect on the direction of PepsiCo i.e., PepsiCo and Westrock Coffee go up and down completely randomly.
Pair Corralation between PepsiCo and Westrock Coffee
Considering the 90-day investment horizon PepsiCo is expected to under-perform the Westrock Coffee. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 3.06 times less risky than Westrock Coffee. The stock trades about -0.06 of its potential returns per unit of risk. The Westrock Coffee is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 664.00 in Westrock Coffee on September 1, 2024 and sell it today you would earn a total of 139.00 from holding Westrock Coffee or generate 20.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. Westrock Coffee
Performance |
| Timeline |
| PepsiCo |
| Westrock Coffee |
PepsiCo and Westrock Coffee Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Westrock Coffee
The main advantage of trading using opposite PepsiCo and Westrock Coffee positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Westrock Coffee 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 Westrock Coffee will offset losses from the drop in Westrock Coffee's long position.| PepsiCo vs. Coca Cola Femsa SAB | PepsiCo vs. National Beverage Corp | PepsiCo vs. Embotelladora Andina SA |
| Westrock Coffee vs. Campbell Soup | Westrock Coffee vs. ConAgra Foods | Westrock Coffee vs. Hormel Foods | Westrock Coffee vs. Kellanova |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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