Correlation Between PepsiCo and Federal Home
Can any of the company-specific risk be diversified away by investing in both PepsiCo and Federal Home 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 Federal Home into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Federal Home Loan, you can compare the effects of market volatilities on PepsiCo and Federal Home 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 Federal Home. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Federal Home.
Diversification Opportunities for PepsiCo and Federal Home
0.26 | Correlation Coefficient |
Modest diversification
The 3 months correlation between PepsiCo and Federal is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Federal Home Loan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Federal Home Loan 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 Federal Home. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Federal Home Loan has no effect on the direction of PepsiCo i.e., PepsiCo and Federal Home go up and down completely randomly.
Pair Corralation between PepsiCo and Federal Home
Considering the 90-day investment horizon PepsiCo is expected to generate 0.58 times more return on investment than Federal Home. However, PepsiCo is 1.72 times less risky than Federal Home. It trades about 0.1 of its potential returns per unit of risk. Federal Home Loan is currently generating about -0.02 per unit of risk. If you would invest 17,273 in PepsiCo on January 26, 2024 and sell it today you would earn a total of 468.00 from holding PepsiCo or generate 2.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
PepsiCo vs. Federal Home Loan
Performance |
| Timeline |
| PepsiCo |
| Federal Home Loan |
PepsiCo and Federal Home Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PepsiCo and Federal Home
The main advantage of trading using opposite PepsiCo and Federal Home positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Federal Home 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 Federal Home will offset losses from the drop in Federal Home's long position.| PepsiCo vs. Aquagold International | PepsiCo vs. Morningstar Unconstrained Allocation | PepsiCo vs. Thrivent High Yield | PepsiCo vs. Via Renewables |
| Federal Home vs. Federal Home Loan | Federal Home vs. Federal Home Loan | Federal Home vs. Federal Home Loan | Federal Home vs. Federal National Mortgage |
Check out your portfolio center.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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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