Correlation Between Oak Woods and PepsiCo

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

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

Diversification Opportunities for Oak Woods and PepsiCo

-0.64

Correlation Coefficient

Oak Woods  PepsiCo

Excellent diversification

The 3 months correlation between Oak and PepsiCo is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Oak Woods Acquisition and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Oak Woods 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 Oak Woods Acquisition 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 Oak Woods i.e., Oak Woods and PepsiCo go up and down completely randomly.

Pair Corralation between Oak Woods and PepsiCo

Assuming the 90 days horizon Oak Woods Acquisition is expected to under-perform the PepsiCo. But the stock apears to be less risky and, when comparing its historical volatility, Oak Woods Acquisition is 1.53 times less risky than PepsiCo. The stock trades about -0.06 of its potential returns per unit of risk. The PepsiCo is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  15,728  in PepsiCo on September 16, 2024 and sell it today you would earn a total of  69.00  from holding PepsiCo or generate 0.44% return on investment over 90 days.

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

Oak Woods Acquisition  vs.  PepsiCo

Oak Woods Acquisition

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oak Woods Acquisition are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Oak Woods is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 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 Oak Woods and PepsiCo

The main advantage of trading using opposite Oak Woods and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oak Woods 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 Oak Woods Acquisition 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.