Correlation Between PepsiCo and Identiv

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

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

Diversification Opportunities for PepsiCo and Identiv

0.51

Correlation Coefficient

PepsiCo  Identiv

Very weak diversification

The 3 months correlation between PepsiCo and Identiv is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv and PepsiCo 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 PepsiCo are associated (or correlated) with Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of PepsiCo i.e., PepsiCo and Identiv go up and down completely randomly.

Pair Corralation between PepsiCo and Identiv

Assuming the 90 days horizon PepsiCo is expected to generate 0.48 times more return on investment than Identiv. However, PepsiCo is 2.1 times less risky than Identiv. It trades about -0.04 of its potential returns per unit of risk. Identiv is currently generating about -0.05 per unit of risk. If you would invest  14,529  in PepsiCo on December 30, 2024 and sell it today you would lose (829.00) from holding PepsiCo or give up 5.71% of portfolio value over 90 days.

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

PepsiCo  vs.  Identiv

PepsiCo

Risk-Adjusted Performance

Very Weak

Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, PepsiCo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Identiv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Identiv has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with PepsiCo and Identiv

The main advantage of trading using opposite PepsiCo and Identiv positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Identiv 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 Identiv will offset losses from the drop in Identiv's long position.

The idea behind PepsiCo and Identiv 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.