Correlation Between PEPSICO and Playa Hotels

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

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

Diversification Opportunities for PEPSICO and Playa Hotels

-0.6

Correlation Coefficient

PEPSICO  Playa Hotels

Excellent diversification

The 3 months correlation between PEPSICO and Playa is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC and Playa Hotels Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playa Hotels Resorts 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 are associated (or correlated) with Playa Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playa Hotels Resorts has no effect on the direction of PEPSICO i.e., PEPSICO and Playa Hotels go up and down completely randomly.

Pair Corralation between PEPSICO and Playa Hotels

Assuming the 90 days trading horizon PEPSICO INC is expected to generate 0.33 times more return on investment than Playa Hotels. However, PEPSICO INC is 3.03 times less risky than Playa Hotels. It trades about -0.23 of its potential returns per unit of risk. Playa Hotels Resorts is currently generating about -0.08 per unit of risk. If you would invest  9,245  in PEPSICO INC on September 24, 2024 and sell it today you would lose (218.00) from holding PEPSICO INC or give up 2.36% of portfolio value over 90 days.

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

PEPSICO INC  vs.  Playa Hotels Resorts

PEPSICO INC

Risk-Adjusted Performance

0 of 100

Very Weak

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

Playa Hotels Resorts

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Playa Hotels Resorts are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Playa Hotels sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PEPSICO and Playa Hotels

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

The idea behind PEPSICO INC and Playa Hotels Resorts 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 Commodity Directory module to find actively traded commodities issued by global exchanges.