Correlation Between Obayashi and PEPSICO

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

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

Diversification Opportunities for Obayashi and PEPSICO

0.08

Correlation Coefficient

Obayashi  PEPSICO

Significant diversification

The 3 months correlation between Obayashi and PEPSICO is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Obayashi 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 Obayashi 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 Obayashi 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 Obayashi i.e., Obayashi and PEPSICO go up and down completely randomly.

Pair Corralation between Obayashi and PEPSICO

Assuming the 90 days horizon Obayashi is expected to under-perform the PEPSICO. In addition to that, Obayashi is 20.92 times more volatile than PEPSICO INC 425. It trades about -0.17 of its total potential returns per unit of risk. PEPSICO INC 425 is currently generating about 0.17 per unit of volatility. If you would invest  8,479  in PEPSICO INC 425 on December 30, 2024 and sell it today you would earn a total of  559.00  from holding PEPSICO INC 425 or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	30.77%
Values	Daily Returns

Obayashi  vs.  PEPSICO INC 425

Obayashi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Obayashi 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 fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

PEPSICO INC 425

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC 425 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, PEPSICO sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Obayashi and PEPSICO

The main advantage of trading using opposite Obayashi and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi 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 Obayashi 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.