Correlation Between PEPSICO and Anheuser Busch

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

By analyzing existing cross correlation between PEPSICO INC 35 and Anheuser Busch Inbev, you can compare the effects of market volatilities on PEPSICO and Anheuser Busch 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 Anheuser Busch. Check out your portfolio center. Please also check ongoing floating volatility patterns of PEPSICO and Anheuser Busch.

Diversification Opportunities for PEPSICO and Anheuser Busch

0.21

Correlation Coefficient

PEPSICO  Anheuser Busch

Modest diversification

The 3 months correlation between PEPSICO and Anheuser is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC 35 and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev 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 35 are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of PEPSICO i.e., PEPSICO and Anheuser Busch go up and down completely randomly.

Pair Corralation between PEPSICO and Anheuser Busch

Assuming the 90 days trading horizon PEPSICO INC 35 is expected to generate 0.23 times more return on investment than Anheuser Busch. However, PEPSICO INC 35 is 4.32 times less risky than Anheuser Busch. It trades about -0.06 of its potential returns per unit of risk. Anheuser Busch Inbev is currently generating about -0.41 per unit of risk. If you would invest  9,875  in PEPSICO INC 35 on October 13, 2024 and sell it today you would lose (103.00) from holding PEPSICO INC 35 or give up 1.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.8%
Values	Daily Returns

PEPSICO INC 35  vs.  Anheuser Busch Inbev

PEPSICO INC 35

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days PEPSICO INC 35 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 latest stock price disturbance, may contribute to short-term losses for the investors.

Anheuser Busch Inbev

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anheuser Busch Inbev has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with PEPSICO and Anheuser Busch

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

The idea behind PEPSICO INC 35 and Anheuser Busch Inbev 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.