Correlation Between BBB Foods and PepsiCo
Can any of the company-specific risk be diversified away by investing in both BBB Foods 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 BBB Foods and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and PepsiCo, you can compare the effects of market volatilities on BBB Foods 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 BBB Foods with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and PepsiCo.
Diversification Opportunities for BBB Foods and PepsiCo
Very good diversification
The 3 months correlation between BBB and PepsiCo is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and BBB Foods 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 BBB Foods 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 BBB Foods i.e., BBB Foods and PepsiCo go up and down completely randomly.
Pair Corralation between BBB Foods and PepsiCo
Given the investment horizon of 90 days BBB Foods is expected to generate 3.11 times more return on investment than PepsiCo. However, BBB Foods is 3.11 times more volatile than PepsiCo. It trades about 0.09 of its potential returns per unit of risk. PepsiCo is currently generating about 0.01 per unit of risk. 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 |
BBB Foods vs. PepsiCo
Performance |
| Timeline |
| BBB Foods |
| PepsiCo |
BBB Foods and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and PepsiCo
The main advantage of trading using opposite BBB Foods and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods 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.| BBB Foods vs. Ingles Markets Incorporated | BBB Foods vs. Sendas Distribuidora SA | BBB Foods vs. Grocery Outlet Holding | BBB Foods vs. Ocado Group plc |
| 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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