Correlation Between Molson Coors and PepsiCo

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

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

Diversification Opportunities for Molson Coors and PepsiCo

0.22

Correlation Coefficient

Molson Coors  PepsiCo

Modest diversification

The 3 months correlation between Molson and PepsiCo is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Molson Coors Brewing and PepsiCo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PepsiCo and Molson Coors 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 Molson Coors Brewing 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 Molson Coors i.e., Molson Coors and PepsiCo go up and down completely randomly.

Pair Corralation between Molson Coors and PepsiCo

Considering the 90-day investment horizon Molson Coors Brewing is expected to under-perform the PepsiCo. But the stock apears to be less risky and, when comparing its historical volatility, Molson Coors Brewing is 1.25 times less risky than PepsiCo. The stock trades about -0.22 of its potential returns per unit of risk. The PepsiCo is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  17,273  in PepsiCo on January 26, 2024 and sell it today you would earn a total of  468.00  from holding PepsiCo or generate 2.71% return on investment over 90 days.

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

Molson Coors Brewing  vs.  PepsiCo

Molson Coors Brewing

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Molson Coors Brewing are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Molson Coors is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

PepsiCo

Risk-Adjusted Performance

6 of 100

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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Molson Coors and PepsiCo

The main advantage of trading using opposite Molson Coors and PepsiCo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Molson Coors 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 Molson Coors Brewing 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.