Correlation Between PepsiCo and BRC

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

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

Diversification Opportunities for PepsiCo and BRC

0.75

Correlation Coefficient

PepsiCo  BRC

Poor diversification

The 3 months correlation between PepsiCo and BRC is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and BRC Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BRC Inc 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 BRC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BRC Inc has no effect on the direction of PepsiCo i.e., PepsiCo and BRC go up and down completely randomly.

Pair Corralation between PepsiCo and BRC

Considering the 90-day investment horizon PepsiCo is expected to under-perform the BRC. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.26 times less risky than BRC. The stock trades about -0.44 of its potential returns per unit of risk. The BRC Inc is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  299.00  in BRC Inc on October 8, 2024 and sell it today you would earn a total of  6.00  from holding BRC Inc or generate 2.01% return on investment over 90 days.

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

PepsiCo  vs.  BRC Inc

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. Even with latest unsteady performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

BRC Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRC Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, BRC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with PepsiCo and BRC

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

The idea behind PepsiCo and BRC Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.