Correlation Between PepsiCo and Haverty Furniture

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

By analyzing existing cross correlation between PepsiCo and Haverty Furniture Companies, you can compare the effects of market volatilities on PepsiCo and Haverty Furniture 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 Haverty Furniture. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Haverty Furniture.

Diversification Opportunities for PepsiCo and Haverty Furniture

0.35

Correlation Coefficient

PepsiCo  Haverty Furniture

Weak diversification

The 3 months correlation between PepsiCo and Haverty is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Haverty Furniture Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Haverty Furniture 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 Haverty Furniture. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Haverty Furniture has no effect on the direction of PepsiCo i.e., PepsiCo and Haverty Furniture go up and down completely randomly.

Pair Corralation between PepsiCo and Haverty Furniture

Assuming the 90 days trading horizon PepsiCo is expected to under-perform the Haverty Furniture. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.59 times less risky than Haverty Furniture. The stock trades about -0.03 of its potential returns per unit of risk. The Haverty Furniture Companies is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  2,158  in Haverty Furniture Companies on September 24, 2024 and sell it today you would lose (118.00) from holding Haverty Furniture Companies or give up 5.47% of portfolio value over 90 days.

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

PepsiCo  vs.  Haverty Furniture Companies

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. In spite of comparatively stable basic indicators, PepsiCo is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Haverty Furniture

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Haverty Furniture Companies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PepsiCo and Haverty Furniture

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

The idea behind PepsiCo and Haverty Furniture Companies 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.