Correlation Between PepsiCo and LOWES

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

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

Diversification Opportunities for PepsiCo and LOWES

0.25

Correlation Coefficient

PepsiCo  LOWES

Modest diversification

The 3 months correlation between PepsiCo and LOWES is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and LOWES PANIES INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LOWES PANIES 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 LOWES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LOWES PANIES INC has no effect on the direction of PepsiCo i.e., PepsiCo and LOWES go up and down completely randomly.

Pair Corralation between PepsiCo and LOWES

Considering the 90-day investment horizon PepsiCo is expected to under-perform the LOWES. In addition to that, PepsiCo is 1.74 times more volatile than LOWES PANIES INC. It trades about -0.05 of its total potential returns per unit of risk. LOWES PANIES INC is currently generating about 0.05 per unit of volatility. If you would invest  8,464  in LOWES PANIES INC on December 2, 2024 and sell it today you would earn a total of  191.00  from holding LOWES PANIES INC or generate 2.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.83%
Values	Daily Returns

PepsiCo  vs.  LOWES PANIES INC

PepsiCo

Risk-Adjusted Performance

Very Weak

Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

LOWES PANIES INC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in LOWES PANIES INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, LOWES is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PepsiCo and LOWES

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

The idea behind PepsiCo and LOWES PANIES 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.