Correlation Between Atea ASA and PepsiCo

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

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

Diversification Opportunities for Atea ASA and PepsiCo

-0.58

Correlation Coefficient

Atea ASA  PepsiCo

Excellent diversification

The 3 months correlation between Atea and PepsiCo is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Atea ASA and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Atea ASA 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 Atea ASA 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 Atea ASA i.e., Atea ASA and PepsiCo go up and down completely randomly.

Pair Corralation between Atea ASA and PepsiCo

Assuming the 90 days trading horizon Atea ASA is expected to generate 1.26 times more return on investment than PepsiCo. However, Atea ASA is 1.26 times more volatile than PepsiCo. It trades about -0.01 of its potential returns per unit of risk. PepsiCo is currently generating about -0.4 per unit of risk. If you would invest  1,202  in Atea ASA on October 11, 2024 and sell it today you would lose (4.00) from holding Atea ASA or give up 0.33% of portfolio value over 90 days.

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

Atea ASA  vs.  PepsiCo

Atea ASA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Atea ASA are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile essential indicators, Atea ASA exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 Atea ASA and PepsiCo

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

Check out your portfolio center.

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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.