Correlation Between PepsiCo and Aegean Airlines

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

By analyzing existing cross correlation between PepsiCo and Aegean Airlines SA, you can compare the effects of market volatilities on PepsiCo and Aegean Airlines 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 Aegean Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Aegean Airlines.

Diversification Opportunities for PepsiCo and Aegean Airlines

0.86

Correlation Coefficient

PepsiCo  Aegean Airlines

Very poor diversification

The 3 months correlation between PepsiCo and Aegean is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Aegean Airlines SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegean Airlines SA 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 Aegean Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegean Airlines SA has no effect on the direction of PepsiCo i.e., PepsiCo and Aegean Airlines go up and down completely randomly.

Pair Corralation between PepsiCo and Aegean Airlines

Considering the 90-day investment horizon PepsiCo is expected to generate 0.78 times more return on investment than Aegean Airlines. However, PepsiCo is 1.28 times less risky than Aegean Airlines. It trades about -0.25 of its potential returns per unit of risk. Aegean Airlines SA is currently generating about -0.21 per unit of risk. If you would invest  16,079  in PepsiCo on September 27, 2024 and sell it today you would lose (798.00) from holding PepsiCo or give up 4.96% of portfolio value over 90 days.

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

PepsiCo  vs.  Aegean Airlines SA

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 unsteady 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.

Aegean Airlines SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegean Airlines SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PepsiCo and Aegean Airlines

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

The idea behind PepsiCo and Aegean Airlines SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.