Correlation Between WOLFDEN RES and PepsiCo

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

By analyzing existing cross correlation between WOLFDEN RES P and PepsiCo, you can compare the effects of market volatilities on WOLFDEN RES 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 WOLFDEN RES with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of WOLFDEN RES and PepsiCo.

Diversification Opportunities for WOLFDEN RES and PepsiCo

-0.4

Correlation Coefficient

WOLFDEN RES  PepsiCo

Very good diversification

The 3 months correlation between WOLFDEN and PepsiCo is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding WOLFDEN RES P and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and WOLFDEN RES 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 WOLFDEN RES P 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 has no effect on the direction of WOLFDEN RES i.e., WOLFDEN RES and PepsiCo go up and down completely randomly.

Pair Corralation between WOLFDEN RES and PepsiCo

Assuming the 90 days horizon WOLFDEN RES P is expected to generate 28.54 times more return on investment than PepsiCo. However, WOLFDEN RES is 28.54 times more volatile than PepsiCo. It trades about 0.05 of its potential returns per unit of risk. PepsiCo is currently generating about -0.01 per unit of risk. If you would invest  12.00  in WOLFDEN RES P on September 23, 2024 and sell it today you would lose (9.30) from holding WOLFDEN RES P or give up 77.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

WOLFDEN RES P  vs.  PepsiCo

WOLFDEN RES P

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WOLFDEN RES P are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, WOLFDEN RES reported solid returns over the last few months and may actually be approaching a breakup point.

PepsiCo

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, PepsiCo is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with WOLFDEN RES and PepsiCo

The main advantage of trading using opposite WOLFDEN RES and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WOLFDEN RES 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 WOLFDEN RES P and PepsiCo 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.