Correlation Between Pepsico and Procter Gamble

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

Diversification Opportunities for Pepsico and Procter Gamble

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Pepsico and Procter is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Pepsico and Procter Gamble in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble 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 Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble has no effect on the direction of Pepsico i.e., Pepsico and Procter Gamble go up and down completely randomly.

Pair Corralation between Pepsico and Procter Gamble

Considering the 90-day investment horizon Pepsico is expected to generate 1.03 times more return on investment than Procter Gamble. However, Pepsico is 1.03 times more volatile than Procter Gamble. It trades about -0.12 of its potential returns per unit of risk. Procter Gamble is currently generating about -0.26 per unit of risk. If you would invest  17,227  in Pepsico on July 2, 2022 and sell it today you would lose (566.00)  from holding Pepsico or give up 3.29% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Pepsico  vs.  Procter Gamble

 Performance (%) 
       Timeline  
Pepsico 
Pepsico Performance
0 of 100
Over the last 90 days Pepsico has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Pepsico is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the insiders.

Pepsico Price Channel

Procter Gamble 
Procter Performance
0 of 100
Over the last 90 days Procter Gamble has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Procter Price Channel

Pepsico and Procter Gamble Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Pepsico and Procter Gamble

The main advantage of trading using opposite Pepsico and Procter Gamble positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pepsico position performs unexpectedly, Procter Gamble 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 Procter Gamble will offset losses from the drop in Procter Gamble's long position.
Pepsico vs. Amazon Inc
The idea behind Pepsico and Procter Gamble 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.
Procter Gamble vs. Amazon Inc
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..

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