Correlation Between Reservoir Media and PEPSICO

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

By analyzing existing cross correlation between Reservoir Media and PEPSICO INC 3, you can compare the effects of market volatilities on Reservoir Media 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 Reservoir Media with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reservoir Media and PEPSICO.

Diversification Opportunities for Reservoir Media and PEPSICO

-0.45

Correlation Coefficient

Reservoir Media  PEPSICO

Very good diversification

The 3 months correlation between Reservoir and PEPSICO is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Reservoir Media and PEPSICO INC 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 3 and Reservoir Media 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 Reservoir Media 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 3 has no effect on the direction of Reservoir Media i.e., Reservoir Media and PEPSICO go up and down completely randomly.

Pair Corralation between Reservoir Media and PEPSICO

Given the investment horizon of 90 days Reservoir Media is expected to generate 12.9 times more return on investment than PEPSICO. However, Reservoir Media is 12.9 times more volatile than PEPSICO INC 3. It trades about 0.08 of its potential returns per unit of risk. PEPSICO INC 3 is currently generating about -0.2 per unit of risk. If you would invest  811.00  in Reservoir Media on September 29, 2024 and sell it today you would earn a total of  97.00  from holding Reservoir Media or generate 11.96% return on investment over 90 days.

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

Reservoir Media  vs.  PEPSICO INC 3

Reservoir Media

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Reservoir Media are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Reservoir Media reported solid returns over the last few months and may actually be approaching a breakup point.

PEPSICO INC 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 3 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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Reservoir Media and PEPSICO

The main advantage of trading using opposite Reservoir Media and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reservoir Media 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 Reservoir Media and PEPSICO INC 3 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.