Correlation Between PepsiCo and PFIZER

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

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

Diversification Opportunities for PepsiCo and PFIZER

0.32

Correlation Coefficient

PepsiCo  PFIZER

Weak diversification

The 3 months correlation between PepsiCo and PFIZER is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and PFIZER INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PFIZER 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 PFIZER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PFIZER INC has no effect on the direction of PepsiCo i.e., PepsiCo and PFIZER go up and down completely randomly.

Pair Corralation between PepsiCo and PFIZER

Considering the 90-day investment horizon PepsiCo is expected to under-perform the PFIZER. In addition to that, PepsiCo is 1.51 times more volatile than PFIZER INC. It trades about -0.22 of its total potential returns per unit of risk. PFIZER INC is currently generating about 0.08 per unit of volatility. If you would invest  9,616  in PFIZER INC on September 26, 2024 and sell it today you would earn a total of  226.00  from holding PFIZER INC or generate 2.35% return on investment over 90 days.

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

PepsiCo  vs.  PFIZER 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 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.

PFIZER INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PFIZER INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PFIZER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PepsiCo and PFIZER

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

The idea behind PepsiCo and PFIZER 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.