Correlation Between PEPSICO and Solstad Offshore

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

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

Diversification Opportunities for PEPSICO and Solstad Offshore

0.0

Correlation Coefficient

PEPSICO  Solstad Offshore

Pay attention - limited upside

The 3 months correlation between PEPSICO and Solstad is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding PEPSICO INC and Solstad Offshore ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solstad Offshore ASA 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 Solstad Offshore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solstad Offshore ASA has no effect on the direction of PEPSICO i.e., PEPSICO and Solstad Offshore go up and down completely randomly.

Pair Corralation between PEPSICO and Solstad Offshore

Assuming the 90 days trading horizon PEPSICO INC is expected to generate 0.91 times more return on investment than Solstad Offshore. However, PEPSICO INC is 1.1 times less risky than Solstad Offshore. It trades about 0.09 of its potential returns per unit of risk. Solstad Offshore ASA is currently generating about 0.06 per unit of risk. If you would invest  7,440  in PEPSICO INC on September 26, 2024 and sell it today you would earn a total of  5,287  from holding PEPSICO INC or generate 71.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	45.51%
Values	Daily Returns

PEPSICO INC  vs.  Solstad Offshore ASA

PEPSICO INC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PEPSICO INC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, PEPSICO sustained solid returns over the last few months and may actually be approaching a breakup point.

Solstad Offshore ASA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solstad Offshore ASA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Solstad Offshore is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with PEPSICO and Solstad Offshore

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

The idea behind PEPSICO INC and Solstad Offshore ASA 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.