Correlation Between Palmer Square and PEPSICO

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

By analyzing existing cross correlation between Palmer Square Ultra Short and PEPSICO INC 35, you can compare the effects of market volatilities on Palmer Square 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 Palmer Square with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Palmer Square and PEPSICO.

Diversification Opportunities for Palmer Square and PEPSICO

-0.14

Correlation Coefficient

Palmer Square  PEPSICO

Good diversification

The 3 months correlation between Palmer and PEPSICO is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Palmer Square Ultra Short and PEPSICO INC 35 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 35 and Palmer Square 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 Palmer Square Ultra Short 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 35 has no effect on the direction of Palmer Square i.e., Palmer Square and PEPSICO go up and down completely randomly.

Pair Corralation between Palmer Square and PEPSICO

Assuming the 90 days horizon Palmer Square Ultra Short is expected to generate 0.07 times more return on investment than PEPSICO. However, Palmer Square Ultra Short is 13.85 times less risky than PEPSICO. It trades about 0.74 of its potential returns per unit of risk. PEPSICO INC 35 is currently generating about -0.1 per unit of risk. If you would invest  1,968  in Palmer Square Ultra Short on December 29, 2024 and sell it today you would earn a total of  22.00  from holding Palmer Square Ultra Short or generate 1.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Palmer Square Ultra Short  vs.  PEPSICO INC 35

Palmer Square Ultra

Risk-Adjusted Performance

Market Crasher

Compared to the overall equity markets, risk-adjusted returns on investments in Palmer Square Ultra Short are ranked lower than 58 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Palmer Square is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

PEPSICO INC 35

Risk-Adjusted Performance

Very Weak

Over the last 90 days PEPSICO INC 35 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Palmer Square and PEPSICO

The main advantage of trading using opposite Palmer Square and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Palmer Square 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 Palmer Square Ultra Short and PEPSICO INC 35 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.