Correlation Between PepsiCo and Fevertree Drinks

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

Diversification Opportunities for PepsiCo and Fevertree Drinks

  Correlation Coefficient

Average diversification

The 3 months correlation between PepsiCo and Fevertree is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of PepsiCo i.e., PepsiCo and Fevertree Drinks go up and down completely randomly.

Pair Corralation between PepsiCo and Fevertree Drinks

Considering the 90-day investment horizon PepsiCo is expected to generate 0.32 times more return on investment than Fevertree Drinks. However, PepsiCo is 3.14 times less risky than Fevertree Drinks. It trades about 0.01 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.01 per unit of risk. If you would invest  16,575  in PepsiCo on November 24, 2023 and sell it today you would earn a total of  308.00  from holding PepsiCo or generate 1.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

PepsiCo  vs.  Fevertree Drinks Plc


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 relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
Fevertree Drinks Plc 

Risk-Adjusted Performance

0 of 100

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

PepsiCo and Fevertree Drinks Volatility Contrast

   Predicted Return Density   

Pair Trading with PepsiCo and Fevertree Drinks

The main advantage of trading using opposite PepsiCo and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.
The idea behind PepsiCo and Fevertree Drinks Plc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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