Correlation Between CRA International and PEPSICO

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

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

Diversification Opportunities for CRA International and PEPSICO

0.36

Correlation Coefficient

CRA International  PEPSICO

Weak diversification

The 3 months correlation between CRA and PEPSICO is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding CRA International and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC and CRA International 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 CRA International 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 CRA International i.e., CRA International and PEPSICO go up and down completely randomly.

Pair Corralation between CRA International and PEPSICO

Given the investment horizon of 90 days CRA International is expected to under-perform the PEPSICO. In addition to that, CRA International is 9.12 times more volatile than PEPSICO INC. It trades about -0.03 of its total potential returns per unit of risk. PEPSICO INC is currently generating about 0.06 per unit of volatility. If you would invest  9,066  in PEPSICO INC on December 27, 2024 and sell it today you would earn a total of  91.00  from holding PEPSICO INC or generate 1.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

CRA International  vs.  PEPSICO INC

CRA International

Risk-Adjusted Performance

Very Weak

Over the last 90 days CRA International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, CRA International is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

PEPSICO INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, PEPSICO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CRA International and PEPSICO

The main advantage of trading using opposite CRA International and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CRA International 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 CRA International 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.