Correlation Between Eq Energy and PepsiCo

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

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

Diversification Opportunities for Eq Energy and PepsiCo

0.69

Correlation Coefficient

Eq Energy  PepsiCo

Poor diversification

The 3 months correlation between EQLB and PepsiCo is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Eq Energy Drink and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Eq 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 Eq Energy Drink 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 Eq Energy i.e., Eq Energy and PepsiCo go up and down completely randomly.

Pair Corralation between Eq Energy and PepsiCo

Given the investment horizon of 90 days Eq Energy Drink is expected to generate 25.96 times more return on investment than PepsiCo. However, Eq Energy is 25.96 times more volatile than PepsiCo. It trades about 0.11 of its potential returns per unit of risk. PepsiCo is currently generating about -0.03 per unit of risk. If you would invest  0.06  in Eq Energy Drink on August 31, 2024 and sell it today you would earn a total of  0.02  from holding Eq Energy Drink or generate 33.33% return on investment over 90 days.

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

Eq Energy Drink  vs.  PepsiCo

Eq Energy Drink

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eq Energy Drink has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 uncertain 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 Eq Energy and PepsiCo

The main advantage of trading using opposite Eq Energy and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eq 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 Eq Energy Drink 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.