Correlation Between PepsiCo and Willamette Valley

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

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

Diversification Opportunities for PepsiCo and Willamette Valley

-0.11

Correlation Coefficient

PepsiCo  Willamette Valley

Good diversification

The 3 months correlation between PepsiCo and Willamette is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of PepsiCo i.e., PepsiCo and Willamette Valley go up and down completely randomly.

Pair Corralation between PepsiCo and Willamette Valley

Considering the 90-day investment horizon PepsiCo is expected to under-perform the Willamette Valley. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 1.48 times less risky than Willamette Valley. The stock trades about -0.03 of its potential returns per unit of risk. The Willamette Valley Vineyards is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  344.00  in Willamette Valley Vineyards on December 23, 2024 and sell it today you would lose (8.00) from holding Willamette Valley Vineyards or give up 2.33% of portfolio value over 90 days.

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

PepsiCo  vs.  Willamette Valley Vineyards

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.

Willamette Valley

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PepsiCo and Willamette Valley

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

The idea behind PepsiCo and Willamette Valley Vineyards 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..