Correlation Between Western Asset and PepsiCo
Can any of the company-specific risk be diversified away by investing in both Western Asset and PepsiCo 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 Western Asset and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Asset Imf and PepsiCo, you can compare the effects of market volatilities on Western Asset and PepsiCo 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 Western Asset with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Asset and PepsiCo.
Diversification Opportunities for Western Asset and PepsiCo
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and PepsiCo is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Western Asset IMF and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Western Asset 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 Western Asset Imf are associated (or correlated) with PepsiCo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PepsiCo has no effect on the direction of Western Asset i.e., Western Asset and PepsiCo go up and down completely randomly.
Pair Corralation between Western Asset and PepsiCo
Considering the 90-day investment horizon Western Asset is expected to generate 2.01 times less return on investment than PepsiCo. But when comparing it to its historical volatility, Western Asset Imf is 1.76 times less risky than PepsiCo. It trades about 0.01 of its potential returns per unit of risk. PepsiCo is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 16,449 in PepsiCo on December 30, 2023 and sell it today you would earn a total of 1,052 from holding PepsiCo or generate 6.4% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Western Asset IMF vs. PepsiCo
Performance |
Timeline |
Western Asset Imf |
PepsiCo |
Western Asset and PepsiCo Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western Asset and PepsiCo
The main advantage of trading using opposite Western Asset and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Asset position performs unexpectedly, PepsiCo 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 PepsiCo will offset losses from the drop in PepsiCo's long position.Western Asset vs. Morgan Stanley India | Western Asset vs. Blackrock Enhanced Capital | Western Asset vs. India Closed | Western Asset vs. Cornerstone Strategic Value |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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