Correlation Between PepsiCo and Sonos

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

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

Diversification Opportunities for PepsiCo and Sonos

-0.74

Correlation Coefficient

PepsiCo  Sonos

Pay attention - limited upside

The 3 months correlation between PepsiCo and Sonos is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Sonos Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sonos 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 Sonos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sonos Inc has no effect on the direction of PepsiCo i.e., PepsiCo and Sonos go up and down completely randomly.

Pair Corralation between PepsiCo and Sonos

Considering the 90-day investment horizon PepsiCo is expected to generate 0.35 times more return on investment than Sonos. However, PepsiCo is 2.84 times less risky than Sonos. It trades about -0.01 of its potential returns per unit of risk. Sonos Inc is currently generating about -0.01 per unit of risk. If you would invest  16,007  in PepsiCo on October 24, 2024 and sell it today you would lose (1,198) from holding PepsiCo or give up 7.48% of portfolio value over 90 days.

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

PepsiCo  vs.  Sonos 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 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.

Sonos Inc

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sonos displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and Sonos

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

The idea behind PepsiCo and Sonos 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.