Correlation Between Fidelity Covington and PEPSICO

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

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

Diversification Opportunities for Fidelity Covington and PEPSICO

-0.42

Correlation Coefficient

Fidelity Covington  PEPSICO

Very good diversification

The 3 months correlation between Fidelity and PEPSICO is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Covington Trust and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC and Fidelity Covington 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 Fidelity Covington Trust 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 Fidelity Covington i.e., Fidelity Covington and PEPSICO go up and down completely randomly.

Pair Corralation between Fidelity Covington and PEPSICO

Given the investment horizon of 90 days Fidelity Covington Trust is expected to under-perform the PEPSICO. In addition to that, Fidelity Covington is 4.36 times more volatile than PEPSICO INC. It trades about -0.11 of its total potential returns per unit of risk. PEPSICO INC is currently generating about -0.39 per unit of volatility. If you would invest  9,155  in PEPSICO INC on October 13, 2024 and sell it today you would lose (228.00) from holding PEPSICO INC or give up 2.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Fidelity Covington Trust  vs.  PEPSICO INC

Fidelity Covington Trust

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity Covington Trust are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, Fidelity Covington is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

PEPSICO INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 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 Fidelity Covington and PEPSICO

The main advantage of trading using opposite Fidelity Covington and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Covington 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 Fidelity Covington Trust 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.