Correlation Between PetMed Express and PEPSICO

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Can any of the company-specific risk be diversified away by investing in both PetMed Express and PEPSICO 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 PetMed Express and PEPSICO into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PetMed Express and PEPSICO INC 55, you can compare the effects of market volatilities on PetMed Express and PEPSICO 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 PetMed Express with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of PetMed Express and PEPSICO.

Diversification Opportunities for PetMed Express and PEPSICO

-0.65
  Correlation Coefficient

Excellent diversification

The 3 months correlation between PetMed and PEPSICO is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding PetMed Express and PEPSICO INC 55 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 55 and PetMed Express 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 PetMed Express are associated (or correlated) with PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC 55 has no effect on the direction of PetMed Express i.e., PetMed Express and PEPSICO go up and down completely randomly.

Pair Corralation between PetMed Express and PEPSICO

Given the investment horizon of 90 days PetMed Express is expected to under-perform the PEPSICO. But the stock apears to be less risky and, when comparing its historical volatility, PetMed Express is 21.91 times less risky than PEPSICO. The stock trades about -0.05 of its potential returns per unit of risk. The PEPSICO INC 55 is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  10,832  in PEPSICO INC 55 on September 24, 2024 and sell it today you would lose (45.00) from holding PEPSICO INC 55 or give up 0.42% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy61.65%
ValuesDaily Returns

PetMed Express  vs.  PEPSICO INC 55

 Performance 
       Timeline  
PetMed Express 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in PetMed Express are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, PetMed Express unveiled solid returns over the last few months and may actually be approaching a breakup point.
PEPSICO INC 55 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days PEPSICO INC 55 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PEPSICO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PetMed Express and PEPSICO Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PetMed Express and PEPSICO

The main advantage of trading using opposite PetMed Express and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PetMed Express position performs unexpectedly, PEPSICO 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 PEPSICO will offset losses from the drop in PEPSICO's long position.
The idea behind PetMed Express and PEPSICO INC 55 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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