Correlation Between Vodka Brands and PEPSICO

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

By analyzing existing cross correlation between Vodka Brands Corp and PEPSICO INC 3, you can compare the effects of market volatilities on Vodka Brands 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 Vodka Brands with a short position of PEPSICO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vodka Brands and PEPSICO.

Diversification Opportunities for Vodka Brands and PEPSICO

0.07

Correlation Coefficient

Vodka Brands  PEPSICO

Significant diversification

The 3 months correlation between Vodka and PEPSICO is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Vodka Brands Corp and PEPSICO INC 3 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO INC 3 and Vodka Brands 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 Vodka Brands Corp 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 3 has no effect on the direction of Vodka Brands i.e., Vodka Brands and PEPSICO go up and down completely randomly.

Pair Corralation between Vodka Brands and PEPSICO

Given the investment horizon of 90 days Vodka Brands Corp is expected to under-perform the PEPSICO. In addition to that, Vodka Brands is 15.26 times more volatile than PEPSICO INC 3. It trades about -0.03 of its total potential returns per unit of risk. PEPSICO INC 3 is currently generating about 0.03 per unit of volatility. If you would invest  9,464  in PEPSICO INC 3 on September 29, 2024 and sell it today you would earn a total of  74.00  from holding PEPSICO INC 3 or generate 0.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Vodka Brands Corp  vs.  PEPSICO INC 3

Vodka Brands Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vodka Brands Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward-looking signals, Vodka Brands is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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

Pair Trading with Vodka Brands and PEPSICO

The main advantage of trading using opposite Vodka Brands and PEPSICO positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vodka Brands 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 Vodka Brands Corp and PEPSICO INC 3 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.