Correlation Between Under Armour and Pepsico

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

Diversification Opportunities for Under Armour and Pepsico

  Correlation Coefficient

Very poor diversification

The 3 months correlation between Under and Pepsico is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Under Armour Inc and Pepsico in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pepsico and Under Armour 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 Under Armour 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 Under Armour i.e., Under Armour and Pepsico go up and down completely randomly.

Pair Corralation between Under Armour and Pepsico

Allowing for the 90-day total investment horizon Under Armour is expected to under-perform the Pepsico. In addition to that, Under Armour is 2.88 times more volatile than Pepsico. It trades about -0.19 of its total potential returns per unit of risk. Pepsico is currently generating about -0.13 per unit of volatility. If you would invest  17,385  in Pepsico on July 8, 2022 and sell it today you would lose (1,105)  from holding Pepsico or give up 6.36% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
ValuesDaily Returns

Under Armour Inc  vs.  Pepsico

 Performance (%) 
Under Armour 
Under Performance
0 of 100
Over the last 90 days Under Armour has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long term up-swing for the company investors.

Under Price Channel

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

Under Armour and Pepsico Volatility Contrast

   Predicted Return Density   

Pair Trading with Under Armour and Pepsico

The main advantage of trading using opposite Under Armour and Pepsico positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Under Armour 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.
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The idea behind Under Armour 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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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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