Correlation Between PepsiCo and STRYKER

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

By analyzing existing cross correlation between PepsiCo and STRYKER P 4625, you can compare the effects of market volatilities on PepsiCo and STRYKER 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 STRYKER. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and STRYKER.

Diversification Opportunities for PepsiCo and STRYKER

0.43

Correlation Coefficient

PepsiCo  STRYKER

Very weak diversification

The 3 months correlation between PepsiCo and STRYKER is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and STRYKER P 4625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRYKER P 4625 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 STRYKER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRYKER P 4625 has no effect on the direction of PepsiCo i.e., PepsiCo and STRYKER go up and down completely randomly.

Pair Corralation between PepsiCo and STRYKER

Considering the 90-day investment horizon PepsiCo is expected to under-perform the STRYKER. In addition to that, PepsiCo is 1.2 times more volatile than STRYKER P 4625. It trades about -0.13 of its total potential returns per unit of risk. STRYKER P 4625 is currently generating about -0.04 per unit of volatility. If you would invest  9,289  in STRYKER P 4625 on September 3, 2024 and sell it today you would lose (154.00) from holding STRYKER P 4625 or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	82.81%
Values	Daily Returns

PepsiCo  vs.  STRYKER P 4625

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.

STRYKER P 4625

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRYKER P 4625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, STRYKER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with PepsiCo and STRYKER

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

The idea behind PepsiCo and STRYKER P 4625 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..