Correlation Between Nongfu Spring and PepsiCo

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

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

Diversification Opportunities for Nongfu Spring and PepsiCo

-0.25

Correlation Coefficient

Nongfu Spring  PepsiCo

Very good diversification

The 3 months correlation between Nongfu and PepsiCo is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Nongfu Spring Co and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Nongfu Spring 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 Nongfu Spring Co 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 Nongfu Spring i.e., Nongfu Spring and PepsiCo go up and down completely randomly.

Pair Corralation between Nongfu Spring and PepsiCo

Assuming the 90 days horizon Nongfu Spring Co is expected to generate 3.2 times more return on investment than PepsiCo. However, Nongfu Spring is 3.2 times more volatile than PepsiCo. It trades about 0.21 of its potential returns per unit of risk. PepsiCo is currently generating about -0.26 per unit of risk. If you would invest  389.00  in Nongfu Spring Co on September 23, 2024 and sell it today you would earn a total of  53.00  from holding Nongfu Spring Co or generate 13.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Nongfu Spring Co  vs.  PepsiCo

Nongfu Spring

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nongfu Spring Co are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Nongfu Spring reported 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. Even with latest fragile 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 Nongfu Spring and PepsiCo

The main advantage of trading using opposite Nongfu Spring and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nongfu Spring 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 Nongfu Spring Co 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.