Correlation Between Scandinavian Tobacco and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Scandinavian Tobacco and PepsiCo 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 Scandinavian Tobacco and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Scandinavian Tobacco Group and PepsiCo, you can compare the effects of market volatilities on Scandinavian Tobacco and PepsiCo 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 Scandinavian Tobacco with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Scandinavian Tobacco and PepsiCo.
Diversification Opportunities for Scandinavian Tobacco and PepsiCo
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Scandinavian and PepsiCo is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Scandinavian Tobacco Group and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Scandinavian Tobacco 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 Scandinavian Tobacco Group are associated (or correlated) with PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of Scandinavian Tobacco i.e., Scandinavian Tobacco and PepsiCo go up and down completely randomly.
Pair Corralation between Scandinavian Tobacco and PepsiCo
Assuming the 90 days horizon Scandinavian Tobacco Group is expected to under-perform the PepsiCo. In addition to that, Scandinavian Tobacco is 1.02 times more volatile than PepsiCo. It trades about -0.28 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.06 per unit of volatility. If you would invest 16,608 in PepsiCo on September 1, 2024 and sell it today you would lose (263.00) from holding PepsiCo or give up 1.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 95.45% |
| Values | Daily Returns |
Scandinavian Tobacco Group vs. PepsiCo
Performance |
| Timeline |
| Scandinavian Tobacco |
| PepsiCo |
Scandinavian Tobacco and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Scandinavian Tobacco and PepsiCo
The main advantage of trading using opposite Scandinavian Tobacco and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scandinavian Tobacco position performs unexpectedly, PepsiCo 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 PepsiCo will offset losses from the drop in PepsiCo's long position.| Scandinavian Tobacco vs. Universal | Scandinavian Tobacco vs. Imperial Brands PLC | Scandinavian Tobacco vs. Japan Tobacco ADR | Scandinavian Tobacco vs. Philip Morris International |
| PepsiCo vs. Coca Cola Femsa SAB | PepsiCo vs. Embotelladora Andina SA | PepsiCo vs. National Beverage Corp | PepsiCo vs. Embotelladora Andina SA |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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