Correlation Between PEPSICO and Codexis

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

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

Diversification Opportunities for PEPSICO and Codexis

-0.5

Correlation Coefficient

PEPSICO  Codexis

Very good diversification

The 3 months correlation between PEPSICO and Codexis is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC and Codexis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Codexis 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 Codexis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Codexis has no effect on the direction of PEPSICO i.e., PEPSICO and Codexis go up and down completely randomly.

Pair Corralation between PEPSICO and Codexis

Assuming the 90 days trading horizon PEPSICO is expected to generate 10.74 times less return on investment than Codexis. But when comparing it to its historical volatility, PEPSICO INC is 7.77 times less risky than Codexis. It trades about 0.08 of its potential returns per unit of risk. Codexis is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  456.00  in Codexis on September 27, 2024 and sell it today you would earn a total of  44.00  from holding Codexis or generate 9.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

PEPSICO INC  vs.  Codexis

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Codexis

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Codexis are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Codexis unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PEPSICO and Codexis

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

The idea behind PEPSICO INC and Codexis 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 Stocks Directory module to find actively traded stocks across global markets.