Correlation Between PepsiCo and AXWAY SOFTWARE

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

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

Diversification Opportunities for PepsiCo and AXWAY SOFTWARE

-0.39

Correlation Coefficient

PepsiCo  AXWAY SOFTWARE

Very good diversification

The 3 months correlation between PepsiCo and AXWAY is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and AXWAY SOFTWARE EO in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AXWAY SOFTWARE EO and PepsiCo 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 PepsiCo are associated (or correlated) with AXWAY SOFTWARE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AXWAY SOFTWARE EO has no effect on the direction of PepsiCo i.e., PepsiCo and AXWAY SOFTWARE go up and down completely randomly.

Pair Corralation between PepsiCo and AXWAY SOFTWARE

Assuming the 90 days horizon PepsiCo is expected to under-perform the AXWAY SOFTWARE. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 1.26 times less risky than AXWAY SOFTWARE. The stock trades about -0.06 of its potential returns per unit of risk. The AXWAY SOFTWARE EO is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,350  in AXWAY SOFTWARE EO on September 28, 2024 and sell it today you would earn a total of  300.00  from holding AXWAY SOFTWARE EO or generate 12.77% return on investment over 90 days.

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

PepsiCo  vs.  AXWAY SOFTWARE EO

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.

AXWAY SOFTWARE EO

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in AXWAY SOFTWARE EO are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AXWAY SOFTWARE reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and AXWAY SOFTWARE

The main advantage of trading using opposite PepsiCo and AXWAY SOFTWARE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, AXWAY SOFTWARE 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 AXWAY SOFTWARE will offset losses from the drop in AXWAY SOFTWARE's long position.

The idea behind PepsiCo and AXWAY SOFTWARE EO 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..