Correlation Between Citigroup and PEPSICO

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

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

Diversification Opportunities for Citigroup and PEPSICO

-0.12

Correlation Coefficient

Citigroup  PEPSICO

Good diversification

The 3 months correlation between Citigroup and PEPSICO is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC and Citigroup 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 Citigroup 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 INC has no effect on the direction of Citigroup i.e., Citigroup and PEPSICO go up and down completely randomly.

Pair Corralation between Citigroup and PEPSICO

Taking into account the 90-day investment horizon Citigroup is expected to generate 38.99 times less return on investment than PEPSICO. But when comparing it to its historical volatility, Citigroup is 43.01 times less risky than PEPSICO. It trades about 0.07 of its potential returns per unit of risk. PEPSICO INC is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  8,024  in PEPSICO INC on September 24, 2024 and sell it today you would lose (651.00) from holding PEPSICO INC or give up 8.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	41.25%
Values	Daily Returns

Citigroup  vs.  PEPSICO INC

Citigroup

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup exhibited solid returns over the last few months and may actually be approaching a breakup point.

PEPSICO INC

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days PEPSICO INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PEPSICO INC investors.

Pair Trading with Citigroup and PEPSICO

The main advantage of trading using opposite Citigroup and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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 Citigroup and PEPSICO INC 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.