Correlation Between Casio Computer and PEPSICO

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

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

Diversification Opportunities for Casio Computer and PEPSICO

0.14

Correlation Coefficient

Casio Computer  PEPSICO

Average diversification

The 3 months correlation between Casio and PEPSICO is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Casio Computer Co and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC and Casio Computer 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 Casio Computer Co 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 Casio Computer i.e., Casio Computer and PEPSICO go up and down completely randomly.

Pair Corralation between Casio Computer and PEPSICO

Assuming the 90 days horizon Casio Computer Co is expected to generate 1.11 times more return on investment than PEPSICO. However, Casio Computer is 1.11 times more volatile than PEPSICO INC. It trades about 0.13 of its potential returns per unit of risk. PEPSICO INC is currently generating about 0.11 per unit of risk. If you would invest  7,830  in Casio Computer Co on October 5, 2024 and sell it today you would earn a total of  615.00  from holding Casio Computer Co or generate 7.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

Casio Computer Co  vs.  PEPSICO INC

Casio Computer

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Casio Computer Co are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Casio Computer is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

PEPSICO INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC are ranked lower than 3 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Casio Computer and PEPSICO

The main advantage of trading using opposite Casio Computer and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Casio Computer 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 Casio Computer Co 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.