diversifiable risk of combining PepsiCo and Aquagold International into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Aquagold International, you can compare the effects of market volatilities on PepsiCo and Aquagold International 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 Aquagold International. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Aquagold International.
Diversification Opportunities for PepsiCo and Aquagold International
Pair Corralation between PepsiCo and Aquagold International
Considering the 90-day investment horizon PepsiCo is expected to under-perform the Aquagold International. But the stock apears to be less risky and, when comparing its historical volatility, PepsiCo is 3.68 times less risky than Aquagold International. The stock trades about -0.06 of its potential returns per unit of risk. The Aquagold International is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 0.50 in Aquagold International on December 1, 2023 and sell it today you would earn a total of 0.10 from holding Aquagold International or generate 20.0% return on investment over 90 days.
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PepsiCo vs. Aquagold International
PepsiCo and Aquagold International Volatility Contrast
Pair Trading with PepsiCo and Aquagold InternationalThe main advantage of trading using opposite PepsiCo and Aquagold International positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Aquagold International 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 Aquagold International will offset losses from the drop in Aquagold International's long position. The idea behind PepsiCo and Aquagold International 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.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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