Correlation Between PepsiCo and Equinix

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

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

Diversification Opportunities for PepsiCo and Equinix

-0.05

Correlation Coefficient

PepsiCo  Equinix

Good diversification

The 3 months correlation between PepsiCo and Equinix is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Equinix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equinix 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 Equinix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equinix has no effect on the direction of PepsiCo i.e., PepsiCo and Equinix go up and down completely randomly.

Pair Corralation between PepsiCo and Equinix

Considering the 90-day investment horizon PepsiCo is expected to generate 0.9 times more return on investment than Equinix. However, PepsiCo is 1.12 times less risky than Equinix. It trades about -0.01 of its potential returns per unit of risk. Equinix is currently generating about -0.09 per unit of risk. If you would invest  14,996  in PepsiCo on December 21, 2024 and sell it today you would lose (281.00) from holding PepsiCo or give up 1.87% of portfolio value over 90 days.

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

PepsiCo  vs.  Equinix

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.

Equinix

Risk-Adjusted Performance

Very Weak

Over the last 90 days Equinix has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with PepsiCo and Equinix

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

The idea behind PepsiCo and Equinix 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..