Correlation Between PepsiCo and KLA Tencor

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

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

Diversification Opportunities for PepsiCo and KLA Tencor

0.65

Correlation Coefficient

PepsiCo  KLA Tencor

Poor diversification

The 3 months correlation between PepsiCo and KLA is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and KLA Tencor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Tencor 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 KLA Tencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Tencor has no effect on the direction of PepsiCo i.e., PepsiCo and KLA Tencor go up and down completely randomly.

Pair Corralation between PepsiCo and KLA Tencor

Considering the 90-day investment horizon PepsiCo is expected to under-perform the KLA Tencor. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 2.48 times less risky than KLA Tencor. The stock trades about -0.01 of its potential returns per unit of risk. The KLA Tencor is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  41,135  in KLA Tencor on October 4, 2024 and sell it today you would earn a total of  22,264  from holding KLA Tencor or generate 54.12% return on investment over 90 days.

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

PepsiCo  vs.  KLA Tencor

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.

KLA Tencor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Tencor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PepsiCo and KLA Tencor

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

The idea behind PepsiCo and KLA Tencor 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.