Correlation Between PepsiCo and Funko

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

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

Diversification Opportunities for PepsiCo and Funko

0.49

Correlation Coefficient

PepsiCo  Funko

Very weak diversification

The 3 months correlation between PepsiCo and Funko is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Funko Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Funko 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 Funko. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Funko Inc has no effect on the direction of PepsiCo i.e., PepsiCo and Funko go up and down completely randomly.

Pair Corralation between PepsiCo and Funko

Considering the 90-day investment horizon PepsiCo is expected to generate 137.23 times less return on investment than Funko. But when comparing it to its historical volatility, PepsiCo is 3.5 times less risky than Funko. It trades about 0.0 of its potential returns per unit of risk. Funko Inc is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  815.00  in Funko Inc on September 19, 2024 and sell it today you would earn a total of  330.00  from holding Funko Inc or generate 40.49% return on investment over 90 days.

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

PepsiCo  vs.  Funko 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.

Funko Inc

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Funko Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward-looking signals, Funko is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with PepsiCo and Funko

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

The idea behind PepsiCo and Funko 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.