Correlation Between Grocery Outlet and PepsiCo

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

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

Diversification Opportunities for Grocery Outlet and PepsiCo

-0.18

Correlation Coefficient

Grocery Outlet  PepsiCo

Good diversification

The 3 months correlation between Grocery and PepsiCo is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Grocery Outlet Holding and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Grocery Outlet 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 Grocery Outlet Holding 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 Grocery Outlet i.e., Grocery Outlet and PepsiCo go up and down completely randomly.

Pair Corralation between Grocery Outlet and PepsiCo

Allowing for the 90-day total investment horizon Grocery Outlet Holding is expected to generate 4.07 times more return on investment than PepsiCo. However, Grocery Outlet is 4.07 times more volatile than PepsiCo. It trades about 0.01 of its potential returns per unit of risk. PepsiCo is currently generating about -0.15 per unit of risk. If you would invest  1,619  in Grocery Outlet Holding on October 3, 2024 and sell it today you would lose (58.00) from holding Grocery Outlet Holding or give up 3.58% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Grocery Outlet Holding  vs.  PepsiCo

Grocery Outlet Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Grocery Outlet Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Grocery Outlet is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

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. Even with latest unsteady performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Grocery Outlet and PepsiCo

The main advantage of trading using opposite Grocery Outlet and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Grocery Outlet 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 Grocery Outlet Holding 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.