Correlation Between PepsiCo and Copper Fox

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Can any of the company-specific risk be diversified away by investing in both PepsiCo and Copper Fox 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 Copper Fox into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PepsiCo and Copper Fox Metals, you can compare the effects of market volatilities on PepsiCo and Copper Fox 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 Copper Fox. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Copper Fox.

Diversification Opportunities for PepsiCo and Copper Fox

0.08
  Correlation Coefficient

Significant diversification

The 3 months correlation between PepsiCo and Copper is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Copper Fox Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Copper Fox Metals 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 Copper Fox. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Copper Fox Metals has no effect on the direction of PepsiCo i.e., PepsiCo and Copper Fox go up and down completely randomly.

Pair Corralation between PepsiCo and Copper Fox

Considering the 90-day investment horizon PepsiCo is expected to generate 0.28 times more return on investment than Copper Fox. However, PepsiCo is 3.52 times less risky than Copper Fox. It trades about -0.18 of its potential returns per unit of risk. Copper Fox Metals is currently generating about -0.07 per unit of risk. If you would invest  17,170  in PepsiCo on December 3, 2023 and sell it today you would lose (711.00) from holding PepsiCo or give up 4.14% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

PepsiCo  vs.  Copper Fox Metals

 Performance 
       Timeline  
PepsiCo 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days PepsiCo has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.
Copper Fox Metals 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Copper Fox Metals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Copper Fox is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

PepsiCo and Copper Fox Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with PepsiCo and Copper Fox

The main advantage of trading using opposite PepsiCo and Copper Fox positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Copper Fox 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 Copper Fox will offset losses from the drop in Copper Fox's long position.
The idea behind PepsiCo and Copper Fox Metals 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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