Correlation Between PEPSICO and Boston Beer

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

By analyzing existing cross correlation between PEPSICO INC 425 and Boston Beer, you can compare the effects of market volatilities on PEPSICO and Boston Beer 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 PEPSICO with a short position of Boston Beer. Check out your portfolio center. Please also check ongoing floating volatility patterns of PEPSICO and Boston Beer.

Diversification Opportunities for PEPSICO and Boston Beer

0.09

Correlation Coefficient

PEPSICO  Boston Beer

Significant diversification

The 3 months correlation between PEPSICO and Boston is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC 425 and Boston Beer in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Boston Beer and PEPSICO 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 PEPSICO INC 425 are associated (or correlated) with Boston Beer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Boston Beer has no effect on the direction of PEPSICO i.e., PEPSICO and Boston Beer go up and down completely randomly.

Pair Corralation between PEPSICO and Boston Beer

Assuming the 90 days trading horizon PEPSICO INC 425 is expected to generate 34.13 times more return on investment than Boston Beer. However, PEPSICO is 34.13 times more volatile than Boston Beer. It trades about 0.07 of its potential returns per unit of risk. Boston Beer is currently generating about -0.02 per unit of risk. If you would invest  9,356  in PEPSICO INC 425 on October 12, 2024 and sell it today you would lose (1,022) from holding PEPSICO INC 425 or give up 10.92% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	31.92%
Values	Daily Returns

PEPSICO INC 425  vs.  Boston Beer

PEPSICO INC 425

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC 425 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, PEPSICO may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Boston Beer

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Boston Beer has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady 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.

Pair Trading with PEPSICO and Boston Beer

The main advantage of trading using opposite PEPSICO and Boston Beer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PEPSICO position performs unexpectedly, Boston Beer 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 Boston Beer will offset losses from the drop in Boston Beer's long position.

The idea behind PEPSICO INC 425 and Boston Beer 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.