Correlation Between Steven Madden and PEPSICO

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

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

Diversification Opportunities for Steven Madden and PEPSICO

0.8

Correlation Coefficient

Steven Madden  PEPSICO

Very poor diversification

The 3 months correlation between Steven and PEPSICO is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Steven Madden and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC and Steven Madden 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 Steven Madden 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 has no effect on the direction of Steven Madden i.e., Steven Madden and PEPSICO go up and down completely randomly.

Pair Corralation between Steven Madden and PEPSICO

Given the investment horizon of 90 days Steven Madden is expected to generate 5.29 times less return on investment than PEPSICO. In addition to that, Steven Madden is 1.12 times more volatile than PEPSICO INC. It trades about 0.01 of its total potential returns per unit of risk. PEPSICO INC is currently generating about 0.08 per unit of volatility. If you would invest  7,593  in PEPSICO INC on September 26, 2024 and sell it today you would earn a total of  782.00  from holding PEPSICO INC or generate 10.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	72.0%
Values	Daily Returns

Steven Madden  vs.  PEPSICO INC

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

PEPSICO INC

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days PEPSICO INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for PEPSICO INC investors.

Pair Trading with Steven Madden and PEPSICO

The main advantage of trading using opposite Steven Madden and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Steven Madden 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 Steven Madden and PEPSICO INC 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.