Correlation Between Aegon Funding and PepsiCo

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

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

Diversification Opportunities for Aegon Funding and PepsiCo

0.85

Correlation Coefficient

Aegon Funding  PepsiCo

Very poor diversification

The 3 months correlation between Aegon and PepsiCo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Aegon Funding and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Aegon Funding 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 Aegon Funding 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 Aegon Funding i.e., Aegon Funding and PepsiCo go up and down completely randomly.

Pair Corralation between Aegon Funding and PepsiCo

Given the investment horizon of 90 days Aegon Funding is expected to generate 0.89 times more return on investment than PepsiCo. However, Aegon Funding is 1.13 times less risky than PepsiCo. It trades about -0.1 of its potential returns per unit of risk. PepsiCo is currently generating about -0.19 per unit of risk. If you would invest  2,244  in Aegon Funding on September 13, 2024 and sell it today you would lose (124.00) from holding Aegon Funding or give up 5.53% of portfolio value over 90 days.

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

Aegon Funding  vs.  PepsiCo

Aegon Funding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegon Funding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

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. Even with latest inconsistent performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Aegon Funding and PepsiCo

The main advantage of trading using opposite Aegon Funding and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aegon Funding 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 Aegon Funding 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.