Correlation Between China Tontine and PepsiCo

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

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

Diversification Opportunities for China Tontine and PepsiCo

0.0

Correlation Coefficient

China Tontine  PepsiCo

Pay attention - limited upside

The 3 months correlation between China and PepsiCo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding China Tontine Wines and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and China Tontine 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 China Tontine Wines 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 China Tontine i.e., China Tontine and PepsiCo go up and down completely randomly.

Pair Corralation between China Tontine and PepsiCo

Assuming the 90 days horizon China Tontine Wines is expected to generate 91.2 times more return on investment than PepsiCo. However, China Tontine is 91.2 times more volatile than PepsiCo. It trades about 0.09 of its potential returns per unit of risk. PepsiCo is currently generating about -0.02 per unit of risk. If you would invest  1.50  in China Tontine Wines on September 20, 2024 and sell it today you would earn a total of  5.60  from holding China Tontine Wines or generate 373.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

China Tontine Wines  vs.  PepsiCo

China Tontine Wines

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Tontine Wines has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, China Tontine is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest unsteady performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with China Tontine and PepsiCo

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

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..