Correlation Between Visa and PEPSICO

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

By analyzing existing cross correlation between Visa Class A and PEPSICO INC 55, you can compare the effects of market volatilities on Visa and PEPSICO 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 Visa with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Visa and PEPSICO.

Diversification Opportunities for Visa and PEPSICO

-0.61

Correlation Coefficient

Visa  PEPSICO

Excellent diversification

The 3 months correlation between Visa and PEPSICO is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Visa Class A and PEPSICO INC 55 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 55 and Visa 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 Visa Class A are associated (or correlated) with PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC 55 has no effect on the direction of Visa i.e., Visa and PEPSICO go up and down completely randomly.

Pair Corralation between Visa and PEPSICO

Taking into account the 90-day investment horizon Visa Class A is expected to generate 1.08 times more return on investment than PEPSICO. However, Visa is 1.08 times more volatile than PEPSICO INC 55. It trades about 0.08 of its potential returns per unit of risk. PEPSICO INC 55 is currently generating about 0.03 per unit of risk. If you would invest  27,011  in Visa Class A on October 13, 2024 and sell it today you would earn a total of  3,760  from holding Visa Class A or generate 13.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	88.81%
Values	Daily Returns

Visa Class A  vs.  PEPSICO INC 55

Visa Class A

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Class A are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in February 2025.

PEPSICO INC 55

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC 55 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.

Pair Trading with Visa and PEPSICO

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

The idea behind Visa Class A and PEPSICO INC 55 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.