Correlation Between Mamas Creations and PepsiCo

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

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

Diversification Opportunities for Mamas Creations and PepsiCo

-0.18

Correlation Coefficient

Mamas Creations  PepsiCo

Good diversification

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

Pair Corralation between Mamas Creations and PepsiCo

Given the investment horizon of 90 days Mamas Creations is expected to under-perform the PepsiCo. In addition to that, Mamas Creations is 4.41 times more volatile than PepsiCo. It trades about -0.24 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.44 per unit of volatility. If you would invest  15,947  in PepsiCo on October 9, 2024 and sell it today you would lose (1,320) from holding PepsiCo or give up 8.28% of portfolio value over 90 days.

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

Mamas Creations  vs.  PepsiCo

Mamas Creations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mamas Creations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company 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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Mamas Creations and PepsiCo

The main advantage of trading using opposite Mamas Creations and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mamas Creations 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 Mamas Creations 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.