Correlation Between PepsiCo and Talanx AG

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

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

Diversification Opportunities for PepsiCo and Talanx AG

-0.39

Correlation Coefficient

PepsiCo  Talanx AG

Very good diversification

The 3 months correlation between PepsiCo and Talanx is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Talanx AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Talanx AG 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 Talanx AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Talanx AG has no effect on the direction of PepsiCo i.e., PepsiCo and Talanx AG go up and down completely randomly.

Pair Corralation between PepsiCo and Talanx AG

Assuming the 90 days trading horizon PepsiCo is expected to under-perform the Talanx AG. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.13 times less risky than Talanx AG. The stock trades about -0.18 of its potential returns per unit of risk. The Talanx AG is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  8,155  in Talanx AG on October 5, 2024 and sell it today you would lose (30.00) from holding Talanx AG or give up 0.37% of portfolio value over 90 days.

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

PepsiCo  vs.  Talanx AG

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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

Talanx AG

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Talanx AG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, Talanx AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and Talanx AG

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

The idea behind PepsiCo and Talanx AG 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.