Correlation Between PepsiCo and COLUMBIA SPORTSWEAR

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

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

Diversification Opportunities for PepsiCo and COLUMBIA SPORTSWEAR

-0.43

Correlation Coefficient

PepsiCo  COLUMBIA SPORTSWEAR

Very good diversification

The 3 months correlation between PepsiCo and COLUMBIA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and COLUMBIA SPORTSWEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COLUMBIA SPORTSWEAR 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 COLUMBIA SPORTSWEAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COLUMBIA SPORTSWEAR has no effect on the direction of PepsiCo i.e., PepsiCo and COLUMBIA SPORTSWEAR go up and down completely randomly.

Pair Corralation between PepsiCo and COLUMBIA SPORTSWEAR

Assuming the 90 days trading horizon PepsiCo is expected to under-perform the COLUMBIA SPORTSWEAR. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.66 times less risky than COLUMBIA SPORTSWEAR. The stock trades about -0.44 of its potential returns per unit of risk. The COLUMBIA SPORTSWEAR is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  8,000  in COLUMBIA SPORTSWEAR on September 24, 2024 and sell it today you would earn a total of  450.00  from holding COLUMBIA SPORTSWEAR or generate 5.63% return on investment over 90 days.

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

PepsiCo  vs.  COLUMBIA SPORTSWEAR

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.

COLUMBIA SPORTSWEAR

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in COLUMBIA SPORTSWEAR are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, COLUMBIA SPORTSWEAR unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and COLUMBIA SPORTSWEAR

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

The idea behind PepsiCo and COLUMBIA SPORTSWEAR 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..