Correlation Between PepsiCo and Take Two

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

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

Diversification Opportunities for PepsiCo and Take Two

-0.71

Correlation Coefficient

PepsiCo  Take Two

Pay attention - limited upside

The 3 months correlation between PepsiCo and Take is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Take Two Interactive Software in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Take Two Interactive 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 Take Two. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Take Two Interactive has no effect on the direction of PepsiCo i.e., PepsiCo and Take Two go up and down completely randomly.

Pair Corralation between PepsiCo and Take Two

Considering the 90-day investment horizon PepsiCo is expected to under-perform the Take Two. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 1.49 times less risky than Take Two. The stock trades about -0.22 of its potential returns per unit of risk. The Take Two Interactive Software is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  16,101  in Take Two Interactive Software on October 23, 2024 and sell it today you would earn a total of  2,540  from holding Take Two Interactive Software or generate 15.78% return on investment over 90 days.

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

PepsiCo  vs.  Take Two Interactive Software

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.

Take Two Interactive

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Take Two Interactive Software are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Take Two displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and Take Two

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

The idea behind PepsiCo and Take Two Interactive Software 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.