Correlation Between Ishares Trust and PEPSICO

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

By analyzing existing cross correlation between Ishares Trust and PEPSICO INC 35, you can compare the effects of market volatilities on Ishares Trust 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 Ishares Trust with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ishares Trust and PEPSICO.

Diversification Opportunities for Ishares Trust and PEPSICO

-0.32

Correlation Coefficient

Ishares Trust  PEPSICO

Very good diversification

The 3 months correlation between Ishares and PEPSICO is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Ishares Trust and PEPSICO INC 35 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 35 and Ishares Trust 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 Ishares 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 35 has no effect on the direction of Ishares Trust i.e., Ishares Trust and PEPSICO go up and down completely randomly.

Pair Corralation between Ishares Trust and PEPSICO

Given the investment horizon of 90 days Ishares Trust is expected to generate 2.51 times more return on investment than PEPSICO. However, Ishares Trust is 2.51 times more volatile than PEPSICO INC 35. It trades about 0.08 of its potential returns per unit of risk. PEPSICO INC 35 is currently generating about 0.0 per unit of risk. If you would invest  2,068  in Ishares Trust on September 24, 2024 and sell it today you would earn a total of  1,246  from holding Ishares Trust or generate 60.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.57%
Values	Daily Returns

Ishares Trust   vs.  PEPSICO INC 35

Ishares Trust

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ishares Trust are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Ishares Trust may actually be approaching a critical reversion point that can send shares even higher in January 2025.

PEPSICO INC 35

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 35 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ishares Trust and PEPSICO

The main advantage of trading using opposite Ishares Trust and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ishares Trust 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 Ishares Trust and PEPSICO INC 35 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.