Correlation Between PepsiCo and Everest

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

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

Diversification Opportunities for PepsiCo and Everest

0.37

Correlation Coefficient

PepsiCo  Everest

Weak diversification

The 3 months correlation between PepsiCo and Everest is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Everest Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Everest Group 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 Everest. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Everest Group has no effect on the direction of PepsiCo i.e., PepsiCo and Everest go up and down completely randomly.

Pair Corralation between PepsiCo and Everest

Considering the 90-day investment horizon PepsiCo is expected to under-perform the Everest. In addition to that, PepsiCo is 1.11 times more volatile than Everest Group. It trades about -0.02 of its total potential returns per unit of risk. Everest Group is currently generating about 0.01 per unit of volatility. If you would invest  35,465  in Everest Group on December 20, 2024 and sell it today you would earn a total of  157.00  from holding Everest Group or generate 0.44% return on investment over 90 days.

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

PepsiCo  vs.  Everest Group

PepsiCo

Risk-Adjusted Performance

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.

Everest Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days Everest Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Everest 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 Everest

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

The idea behind PepsiCo and Everest Group 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.