Correlation Between ENN Energy and PepsiCo

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

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

Diversification Opportunities for ENN Energy and PepsiCo

-0.72

Correlation Coefficient

ENN Energy  PepsiCo

Pay attention - limited upside

The 3 months correlation between ENN and PepsiCo is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding ENN Energy Holdings and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and ENN Energy 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 ENN Energy Holdings 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 ENN Energy i.e., ENN Energy and PepsiCo go up and down completely randomly.

Pair Corralation between ENN Energy and PepsiCo

Assuming the 90 days trading horizon ENN Energy Holdings is expected to generate 1.97 times more return on investment than PepsiCo. However, ENN Energy is 1.97 times more volatile than PepsiCo. It trades about -0.04 of its potential returns per unit of risk. PepsiCo is currently generating about -0.4 per unit of risk. If you would invest  685.00  in ENN Energy Holdings on October 11, 2024 and sell it today you would lose (10.00) from holding ENN Energy Holdings or give up 1.46% of portfolio value over 90 days.

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

ENN Energy Holdings  vs.  PepsiCo

ENN Energy Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ENN Energy Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, ENN Energy unveiled 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 latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with ENN Energy and PepsiCo

The main advantage of trading using opposite ENN Energy and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ENN Energy 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 ENN Energy Holdings 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.