Correlation Between Sonos and PepsiCo

Can any of the company-specific risk be diversified away by investing in both Sonos 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 Sonos and PepsiCo into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sonos Inc and PepsiCo, you can compare the effects of market volatilities on Sonos 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 Sonos with a short position of PepsiCo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonos and PepsiCo.

Diversification Opportunities for Sonos and PepsiCo

0.01

Correlation Coefficient

Sonos  PepsiCo

Significant diversification

The 3 months correlation between Sonos and PepsiCo is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Sonos Inc and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Sonos 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 Sonos Inc 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 Sonos i.e., Sonos and PepsiCo go up and down completely randomly.

Pair Corralation between Sonos and PepsiCo

Given the investment horizon of 90 days Sonos Inc is expected to under-perform the PepsiCo. In addition to that, Sonos is 3.02 times more volatile than PepsiCo. It trades about 0.0 of its total potential returns per unit of risk. PepsiCo is currently generating about 0.02 per unit of volatility. If you would invest  15,986  in PepsiCo on January 20, 2024 and sell it today you would earn a total of  1,241  from holding PepsiCo or generate 7.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Sonos Inc  vs.  PepsiCo

Sonos Inc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonos Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sonos is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

PepsiCo

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in PepsiCo are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Sonos and PepsiCo

The main advantage of trading using opposite Sonos and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonos 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.

The idea behind Sonos Inc and PepsiCo 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.