Correlation Between PepsiCo and Mamas Creations

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

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

Diversification Opportunities for PepsiCo and Mamas Creations

-0.12

Correlation Coefficient

PepsiCo  Mamas Creations

Good diversification

The 3 months correlation between PepsiCo and Mamas is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Mamas Creations in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mamas Creations 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 Mamas Creations. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mamas Creations has no effect on the direction of PepsiCo i.e., PepsiCo and Mamas Creations go up and down completely randomly.

Pair Corralation between PepsiCo and Mamas Creations

Considering the 90-day investment horizon PepsiCo is expected to generate 0.23 times more return on investment than Mamas Creations. However, PepsiCo is 4.39 times less risky than Mamas Creations. It trades about -0.43 of its potential returns per unit of risk. Mamas Creations is currently generating about -0.23 per unit of risk. If you would invest  15,947  in PepsiCo on October 9, 2024 and sell it today you would lose (1,320) from holding PepsiCo or give up 8.28% of portfolio value over 90 days.

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

PepsiCo  vs.  Mamas Creations

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.

Mamas Creations

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mamas Creations has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary 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 Mamas Creations

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

The idea behind PepsiCo and Mamas Creations 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.