Correlation Between Digimarc and PEPSICO

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

By analyzing existing cross correlation between Digimarc and PEPSICO INC 55, you can compare the effects of market volatilities on Digimarc 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 Digimarc with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digimarc and PEPSICO.

Diversification Opportunities for Digimarc and PEPSICO

-0.63

Correlation Coefficient

Digimarc  PEPSICO

Excellent diversification

The 3 months correlation between Digimarc and PEPSICO is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Digimarc and PEPSICO INC 55 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 55 and Digimarc 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 Digimarc 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 55 has no effect on the direction of Digimarc i.e., Digimarc and PEPSICO go up and down completely randomly.

Pair Corralation between Digimarc and PEPSICO

Given the investment horizon of 90 days Digimarc is expected to generate 28.49 times less return on investment than PEPSICO. But when comparing it to its historical volatility, Digimarc is 21.89 times less risky than PEPSICO. It trades about 0.06 of its potential returns per unit of risk. PEPSICO INC 55 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,832  in PEPSICO INC 55 on September 24, 2024 and sell it today you would lose (45.00) from holding PEPSICO INC 55 or give up 0.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	61.65%
Values	Daily Returns

Digimarc  vs.  PEPSICO INC 55

Digimarc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Digimarc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Digimarc exhibited solid returns over the last few months and may actually be approaching a breakup point.

PEPSICO INC 55

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 55 has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Digimarc and PEPSICO

The main advantage of trading using opposite Digimarc and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digimarc 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 Digimarc and PEPSICO INC 55 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.