Correlation Between CPU SOFTWAREHOUSE and PepsiCo

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

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

Diversification Opportunities for CPU SOFTWAREHOUSE and PepsiCo

0.46

Correlation Coefficient

CPU SOFTWAREHOUSE  PepsiCo

Very weak diversification

The 3 months correlation between CPU and PepsiCo is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding CPU SOFTWAREHOUSE and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE i.e., CPU SOFTWAREHOUSE and PepsiCo go up and down completely randomly.

Pair Corralation between CPU SOFTWAREHOUSE and PepsiCo

Assuming the 90 days trading horizon CPU SOFTWAREHOUSE is expected to under-perform the PepsiCo. In addition to that, CPU SOFTWAREHOUSE is 3.98 times more volatile than PepsiCo. It trades about -0.02 of its total potential returns per unit of risk. PepsiCo is currently generating about -0.06 per unit of volatility. If you would invest  15,133  in PepsiCo on September 28, 2024 and sell it today you would lose (671.00) from holding PepsiCo or give up 4.43% of portfolio value over 90 days.

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

CPU SOFTWAREHOUSE  vs.  PepsiCo

CPU SOFTWAREHOUSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CPU SOFTWAREHOUSE has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, CPU SOFTWAREHOUSE is not utilizing all of its potentials. The newest 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. Despite nearly stable basic indicators, PepsiCo is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with CPU SOFTWAREHOUSE and PepsiCo

The main advantage of trading using opposite CPU SOFTWAREHOUSE and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CPU SOFTWAREHOUSE 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 CPU SOFTWAREHOUSE 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..