Correlation Between PepsiCo and WESTLAKE

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

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

Diversification Opportunities for PepsiCo and WESTLAKE

0.48

Correlation Coefficient

PepsiCo  WESTLAKE

Very weak diversification

The 3 months correlation between PepsiCo and WESTLAKE is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and WESTLAKE CHEM P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WESTLAKE CHEM P 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 WESTLAKE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WESTLAKE CHEM P has no effect on the direction of PepsiCo i.e., PepsiCo and WESTLAKE go up and down completely randomly.

Pair Corralation between PepsiCo and WESTLAKE

Considering the 90-day investment horizon PepsiCo is expected to under-perform the WESTLAKE. In addition to that, PepsiCo is 2.79 times more volatile than WESTLAKE CHEM P. It trades about -0.01 of its total potential returns per unit of risk. WESTLAKE CHEM P is currently generating about 0.01 per unit of volatility. If you would invest  9,498  in WESTLAKE CHEM P on September 5, 2024 and sell it today you would earn a total of  123.00  from holding WESTLAKE CHEM P or generate 1.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	94.14%
Values	Daily Returns

PepsiCo  vs.  WESTLAKE CHEM P

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 inconsistent 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.

WESTLAKE CHEM P

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with PepsiCo and WESTLAKE

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

The idea behind PepsiCo and WESTLAKE CHEM P 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 Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..