Correlation Between Western Digital and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Western Digital 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 Western Digital and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Digital and PepsiCo, you can compare the effects of market volatilities on Western Digital 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 Western Digital with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Digital and PepsiCo.
Diversification Opportunities for Western Digital and PepsiCo
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Western and PepsiCo is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Western Digital and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Western Digital 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 Western Digital 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 Western Digital i.e., Western Digital and PepsiCo go up and down completely randomly.
Pair Corralation between Western Digital and PepsiCo
Considering the 90-day investment horizon Western Digital is expected to generate 2.18 times more return on investment than PepsiCo. However, Western Digital is 2.18 times more volatile than PepsiCo. It trades about 0.11 of its potential returns per unit of risk. PepsiCo is currently generating about -0.07 per unit of risk. If you would invest 6,738 in Western Digital on September 12, 2024 and sell it today you would earn a total of 336.00 from holding Western Digital or generate 4.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Digital vs. PepsiCo
Performance |
| Timeline |
| Western Digital |
| PepsiCo |
Western Digital and PepsiCo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Digital and PepsiCo
The main advantage of trading using opposite Western Digital and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Digital 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.| Western Digital vs. NetApp Inc | Western Digital vs. Logitech International SA | Western Digital vs. HP Inc | Western Digital vs. Dell Technologies |
| PepsiCo vs. Coca Cola Consolidated | PepsiCo vs. Monster Beverage Corp | PepsiCo vs. Celsius Holdings | PepsiCo vs. Keurig Dr Pepper |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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