Correlation Between PepsiCo and Dixons Carphone

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

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

Diversification Opportunities for PepsiCo and Dixons Carphone

-0.3

Correlation Coefficient

PepsiCo  Dixons Carphone

Very good diversification

The 3 months correlation between PepsiCo and Dixons is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Dixons Carphone plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dixons Carphone plc 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 Dixons Carphone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dixons Carphone plc has no effect on the direction of PepsiCo i.e., PepsiCo and Dixons Carphone go up and down completely randomly.

Pair Corralation between PepsiCo and Dixons Carphone

Considering the 90-day investment horizon PepsiCo is expected to under-perform the Dixons Carphone. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 3.63 times less risky than Dixons Carphone. The stock trades about -0.03 of its potential returns per unit of risk. The Dixons Carphone plc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Dixons Carphone plc on October 24, 2024 and sell it today you would earn a total of  58.00  from holding Dixons Carphone plc or generate 96.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.8%
Values	Daily Returns

PepsiCo  vs.  Dixons Carphone plc

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Dixons Carphone plc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dixons Carphone plc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Dixons Carphone is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PepsiCo and Dixons Carphone

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

The idea behind PepsiCo and Dixons Carphone plc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.