Correlation Between Simon Property and PepsiCo

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

Diversification Opportunities for Simon Property and PepsiCo

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between Simon and PepsiCo is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Simon Property Group and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Simon Property 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 Simon Property Group 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 Simon Property i.e., Simon Property and PepsiCo go up and down completely randomly.

Pair Corralation between Simon Property and PepsiCo

Considering the 90-day investment horizon Simon Property Group is expected to under-perform the PepsiCo. In addition to that, Simon Property is 1.74 times more volatile than PepsiCo. It trades about -0.27 of its total potential returns per unit of risk. PepsiCo is currently generating about 0.08 per unit of volatility. If you would invest  17,202  in PepsiCo on January 22, 2024 and sell it today you would earn a total of  211.00  from holding PepsiCo or generate 1.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Simon Property Group  vs.  PepsiCo

 Performance 
       Timeline  
Simon Property Group 

Risk-Adjusted Performance

0 of 100

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

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in PepsiCo are ranked lower than 6 (%) 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 latest stock price agitation, may contribute to short-term losses for the retail investors.

Simon Property and PepsiCo Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Simon Property and PepsiCo

The main advantage of trading using opposite Simon Property and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simon Property 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 Simon Property Group 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.
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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.

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