Correlation Between GREENLIGHT CAP and PepsiCo

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

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

Diversification Opportunities for GREENLIGHT CAP and PepsiCo

-0.35

Correlation Coefficient

GREENLIGHT CAP  PepsiCo

Very good diversification

The 3 months correlation between GREENLIGHT and PepsiCo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding GREENLIGHT CAP RE and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and GREENLIGHT CAP 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 GREENLIGHT CAP RE 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 GREENLIGHT CAP i.e., GREENLIGHT CAP and PepsiCo go up and down completely randomly.

Pair Corralation between GREENLIGHT CAP and PepsiCo

Assuming the 90 days trading horizon GREENLIGHT CAP RE is expected to generate 1.39 times more return on investment than PepsiCo. However, GREENLIGHT CAP is 1.39 times more volatile than PepsiCo. It trades about -0.21 of its potential returns per unit of risk. PepsiCo is currently generating about -0.4 per unit of risk. If you would invest  1,410  in GREENLIGHT CAP RE on October 11, 2024 and sell it today you would lose (70.00) from holding GREENLIGHT CAP RE or give up 4.96% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.44%
Values	Daily Returns

GREENLIGHT CAP RE  vs.  PepsiCo

GREENLIGHT CAP RE

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GREENLIGHT CAP RE are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, GREENLIGHT CAP may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with GREENLIGHT CAP and PepsiCo

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

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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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.