Correlation Between PepsiCo and Vita Coco

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

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

Diversification Opportunities for PepsiCo and Vita Coco

-0.85

Correlation Coefficient

PepsiCo  Vita Coco

Pay attention - limited upside

The 3 months correlation between PepsiCo and Vita is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Vita Coco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vita Coco 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 Vita Coco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vita Coco has no effect on the direction of PepsiCo i.e., PepsiCo and Vita Coco go up and down completely randomly.

Pair Corralation between PepsiCo and Vita Coco

Considering the 90-day investment horizon PepsiCo is expected to under-perform the Vita Coco. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.38 times less risky than Vita Coco. The stock trades about -0.08 of its potential returns per unit of risk. The Vita Coco is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,612  in Vita Coco on August 30, 2024 and sell it today you would earn a total of  950.00  from holding Vita Coco or generate 36.37% return on investment over 90 days.

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

PepsiCo  vs.  Vita Coco

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 relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Vita Coco

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Vita Coco are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental indicators, Vita Coco displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and Vita Coco

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

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