Correlation Between TRAINLINE PLC and PepsiCo

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

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

Diversification Opportunities for TRAINLINE PLC and PepsiCo

-0.6

Correlation Coefficient

TRAINLINE PLC  PepsiCo

Excellent diversification

The 3 months correlation between TRAINLINE and PepsiCo is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding TRAINLINE PLC LS and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and TRAINLINE PLC 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 TRAINLINE PLC LS 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 TRAINLINE PLC i.e., TRAINLINE PLC and PepsiCo go up and down completely randomly.

Pair Corralation between TRAINLINE PLC and PepsiCo

Assuming the 90 days trading horizon TRAINLINE PLC LS is expected to generate 1.86 times more return on investment than PepsiCo. However, TRAINLINE PLC is 1.86 times more volatile than PepsiCo. It trades about 0.12 of its potential returns per unit of risk. PepsiCo is currently generating about -0.36 per unit of risk. If you would invest  492.00  in TRAINLINE PLC LS on September 27, 2024 and sell it today you would earn a total of  18.00  from holding TRAINLINE PLC LS or generate 3.66% return on investment over 90 days.

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

TRAINLINE PLC LS  vs.  PepsiCo

TRAINLINE PLC LS

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TRAINLINE PLC LS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, TRAINLINE PLC 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. Despite nearly stable basic indicators, PepsiCo is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with TRAINLINE PLC and PepsiCo

The main advantage of trading using opposite TRAINLINE PLC and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TRAINLINE PLC 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 TRAINLINE PLC LS 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.