Correlation Between PepsiCo and Valens

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

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

Diversification Opportunities for PepsiCo and Valens

0.12

Correlation Coefficient

PepsiCo  Valens

Average diversification

The 3 months correlation between PepsiCo and Valens is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Valens in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valens 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 Valens. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valens has no effect on the direction of PepsiCo i.e., PepsiCo and Valens go up and down completely randomly.

Pair Corralation between PepsiCo and Valens

Considering the 90-day investment horizon PepsiCo is expected to generate 0.27 times more return on investment than Valens. However, PepsiCo is 3.71 times less risky than Valens. It trades about -0.01 of its potential returns per unit of risk. Valens is currently generating about -0.03 per unit of risk. If you would invest  17,057  in PepsiCo on September 12, 2024 and sell it today you would lose (1,073) from holding PepsiCo or give up 6.29% of portfolio value over 90 days.

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

PepsiCo  vs.  Valens

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.

Valens

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valens are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Valens may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with PepsiCo and Valens

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

The idea behind PepsiCo and Valens 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.