Correlation Between PEPSICO and RCI Hospitality

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

Diversification Opportunities for PEPSICO and RCI Hospitality

-0.42

Correlation Coefficient

PEPSICO  RCI Hospitality

Very good diversification

The 3 months correlation between PEPSICO and RCI is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC 35 and RCI Hospitality Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RCI Hospitality Holdings 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 RCI Hospitality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RCI Hospitality Holdings has no effect on the direction of PEPSICO i.e., PEPSICO and RCI Hospitality go up and down completely randomly.

Pair Corralation between PEPSICO and RCI Hospitality

Assuming the 90 days trading horizon PEPSICO INC 35 is expected to under-perform the RCI Hospitality. But the bond apears to be less risky and, when comparing its historical volatility, PEPSICO INC 35 is 3.61 times less risky than RCI Hospitality. The bond trades about -0.2 of its potential returns per unit of risk. The RCI Hospitality Holdings is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  5,314  in RCI Hospitality Holdings on September 25, 2024 and sell it today you would earn a total of  427.00  from holding RCI Hospitality Holdings or generate 8.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

PEPSICO INC 35  vs.  RCI Hospitality Holdings

PEPSICO INC 35

Risk-Adjusted Performance

0 of 100

Very Weak

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.

RCI Hospitality Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in RCI Hospitality Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain fundamental indicators, RCI Hospitality disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PEPSICO and RCI Hospitality

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

The idea behind PEPSICO INC 35 and RCI Hospitality Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.