Correlation Between BRC and PepsiCo

Can any of the company-specific risk be diversified away by investing in both BRC 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 BRC and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BRC Inc and PepsiCo, you can compare the effects of market volatilities on BRC 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 BRC with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of BRC and PepsiCo.

Diversification Opportunities for BRC and PepsiCo

0.57

Correlation Coefficient

BRC  PepsiCo

Very weak diversification

The 3 months correlation between BRC and PepsiCo is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding BRC Inc and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and BRC 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 BRC Inc 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 BRC i.e., BRC and PepsiCo go up and down completely randomly.

Pair Corralation between BRC and PepsiCo

Given the investment horizon of 90 days BRC Inc is expected to under-perform the PepsiCo. In addition to that, BRC is 4.44 times more volatile than PepsiCo. It trades about -0.01 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.01 per unit of volatility. If you would invest  16,156  in PepsiCo on October 23, 2024 and sell it today you would lose (1,296) from holding PepsiCo or give up 8.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

BRC Inc  vs.  PepsiCo

BRC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

PepsiCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with BRC and PepsiCo

The main advantage of trading using opposite BRC and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRC 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.

The idea behind BRC Inc and PepsiCo pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.