Correlation Between RLX Technology and PepsiCo

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

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

Diversification Opportunities for RLX Technology and PepsiCo

-0.35

Correlation Coefficient

RLX Technology  PepsiCo

Very good diversification

The 3 months correlation between RLX and PepsiCo is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding RLX Technology and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and RLX Technology 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 RLX Technology 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 has no effect on the direction of RLX Technology i.e., RLX Technology and PepsiCo go up and down completely randomly.

Pair Corralation between RLX Technology and PepsiCo

Considering the 90-day investment horizon RLX Technology is expected to generate 3.84 times more return on investment than PepsiCo. However, RLX Technology is 3.84 times more volatile than PepsiCo. It trades about 0.09 of its potential returns per unit of risk. PepsiCo is currently generating about -0.13 per unit of risk. If you would invest  168.00  in RLX Technology on September 3, 2024 and sell it today you would earn a total of  30.00  from holding RLX Technology or generate 17.86% return on investment over 90 days.

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

RLX Technology  vs.  PepsiCo

RLX Technology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in RLX Technology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent essential indicators, RLX Technology showed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with RLX Technology and PepsiCo

The main advantage of trading using opposite RLX Technology and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if RLX Technology 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 RLX Technology and PepsiCo 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 CEOs Directory module to screen CEOs from public companies around the world.