Correlation Between PEPSICO and Safety Shot

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

By analyzing existing cross correlation between PEPSICO INC 3 and Safety Shot, you can compare the effects of market volatilities on PEPSICO and Safety Shot 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 Safety Shot. Check out your portfolio center. Please also check ongoing floating volatility patterns of PEPSICO and Safety Shot.

Diversification Opportunities for PEPSICO and Safety Shot

0.72

Correlation Coefficient

PEPSICO  Safety Shot

Poor diversification

The 3 months correlation between PEPSICO and Safety is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC 3 and Safety Shot in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Safety Shot 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 3 are associated (or correlated) with Safety Shot. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Safety Shot has no effect on the direction of PEPSICO i.e., PEPSICO and Safety Shot go up and down completely randomly.

Pair Corralation between PEPSICO and Safety Shot

Assuming the 90 days trading horizon PEPSICO INC 3 is expected to generate 0.04 times more return on investment than Safety Shot. However, PEPSICO INC 3 is 22.73 times less risky than Safety Shot. It trades about -0.2 of its potential returns per unit of risk. Safety Shot is currently generating about -0.14 per unit of risk. If you would invest  9,777  in PEPSICO INC 3 on September 26, 2024 and sell it today you would lose (239.00) from holding PEPSICO INC 3 or give up 2.44% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

PEPSICO INC 3  vs.  Safety Shot

PEPSICO INC 3

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 3 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 newest stock price disturbance, may contribute to short-term losses for the investors.

Safety Shot

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safety Shot has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with PEPSICO and Safety Shot

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

The idea behind PEPSICO INC 3 and Safety Shot 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.