Correlation Between Highway Holdings and PEPSICO

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

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

Diversification Opportunities for Highway Holdings and PEPSICO

-0.55

Correlation Coefficient

Highway Holdings  PEPSICO

Excellent diversification

The 3 months correlation between Highway and PEPSICO is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Highway Holdings Limited and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC and Highway Holdings 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 Highway Holdings Limited 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 Highway Holdings i.e., Highway Holdings and PEPSICO go up and down completely randomly.

Pair Corralation between Highway Holdings and PEPSICO

Given the investment horizon of 90 days Highway Holdings Limited is expected to under-perform the PEPSICO. In addition to that, Highway Holdings is 6.3 times more volatile than PEPSICO INC. It trades about 0.0 of its total potential returns per unit of risk. PEPSICO INC is currently generating about 0.14 per unit of volatility. If you would invest  9,182  in PEPSICO INC on December 29, 2024 and sell it today you would earn a total of  196.00  from holding PEPSICO INC or generate 2.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

Highway Holdings Limited  vs.  PEPSICO INC

Highway Holdings

Risk-Adjusted Performance

Very Weak

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

PEPSICO INC

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC are ranked lower than 10 (%) 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 Highway Holdings and PEPSICO

The main advantage of trading using opposite Highway Holdings and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Highway Holdings 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 Highway Holdings Limited 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.