Correlation Between PEPSICO and Sea

Can any of the company-specific risk be diversified away by investing in both PEPSICO and Sea 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 Sea 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 Sea, you can compare the effects of market volatilities on PEPSICO and Sea 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 Sea. Check out your portfolio center. Please also check ongoing floating volatility patterns of PEPSICO and Sea.

Diversification Opportunities for PEPSICO and Sea

-0.37

Correlation Coefficient

PEPSICO  Sea

Very good diversification

The 3 months correlation between PEPSICO and Sea is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC 425 and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of PEPSICO i.e., PEPSICO and Sea go up and down completely randomly.

Pair Corralation between PEPSICO and Sea

Assuming the 90 days trading horizon PEPSICO is expected to generate 1.81 times less return on investment than Sea. In addition to that, PEPSICO is 1.15 times more volatile than Sea. It trades about 0.04 of its total potential returns per unit of risk. Sea is currently generating about 0.09 per unit of volatility. If you would invest  9,683  in Sea on October 15, 2024 and sell it today you would earn a total of  1,146  from holding Sea or generate 11.84% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	50.82%
Values	Daily Returns

PEPSICO INC 425  vs.  Sea

PEPSICO INC 425

Risk-Adjusted Performance

3 of 100

Insignificant

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 unsteady basic indicators, PEPSICO may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Sea

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PEPSICO and Sea

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

The idea behind PEPSICO INC 425 and Sea 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.