Correlation Between Nuvalent and PEPSICO

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

By analyzing existing cross correlation between Nuvalent and PEPSICO INC 425, you can compare the effects of market volatilities on Nuvalent 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 Nuvalent with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvalent and PEPSICO.

Diversification Opportunities for Nuvalent and PEPSICO

0.28

Correlation Coefficient

Nuvalent  PEPSICO

Modest diversification

The 3 months correlation between Nuvalent and PEPSICO is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and PEPSICO INC 425 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 425 and Nuvalent 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 Nuvalent 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 425 has no effect on the direction of Nuvalent i.e., Nuvalent and PEPSICO go up and down completely randomly.

Pair Corralation between Nuvalent and PEPSICO

Given the investment horizon of 90 days Nuvalent is expected to under-perform the PEPSICO. But the stock apears to be less risky and, when comparing its historical volatility, Nuvalent is 1.89 times less risky than PEPSICO. The stock trades about -0.32 of its potential returns per unit of risk. The PEPSICO INC 425 is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  8,596  in PEPSICO INC 425 on October 14, 2024 and sell it today you would earn a total of  930.00  from holding PEPSICO INC 425 or generate 10.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	63.16%
Values	Daily Returns

Nuvalent  vs.  PEPSICO INC 425

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

PEPSICO INC 425

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC 425 are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, PEPSICO may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Nuvalent and PEPSICO

The main advantage of trading using opposite Nuvalent and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuvalent 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 Nuvalent and PEPSICO INC 425 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.