Correlation Between ScanSource and PEPSICO

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

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

Diversification Opportunities for ScanSource and PEPSICO

-0.18

Correlation Coefficient

ScanSource  PEPSICO

Good diversification

The 3 months correlation between ScanSource and PEPSICO is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding ScanSource 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 ScanSource 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 ScanSource 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 ScanSource i.e., ScanSource and PEPSICO go up and down completely randomly.

Pair Corralation between ScanSource and PEPSICO

Given the investment horizon of 90 days ScanSource is expected to generate 12.84 times more return on investment than PEPSICO. However, ScanSource is 12.84 times more volatile than PEPSICO INC 3. It trades about 0.01 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  4,815  in ScanSource on September 26, 2024 and sell it today you would lose (14.00) from holding ScanSource or give up 0.29% of portfolio value over 90 days.

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

ScanSource  vs.  PEPSICO INC 3

ScanSource

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ScanSource has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ScanSource is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ScanSource and PEPSICO

The main advantage of trading using opposite ScanSource and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ScanSource 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 ScanSource 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 Commodity Directory module to find actively traded commodities issued by global exchanges.