Correlation Between PepsiCo and Oatly Group

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

By analyzing existing cross correlation between PepsiCo and Oatly Group AB, you can compare the effects of market volatilities on PepsiCo and Oatly Group 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 Oatly Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of PepsiCo and Oatly Group.

Diversification Opportunities for PepsiCo and Oatly Group

0.23

Correlation Coefficient

PepsiCo  Oatly Group

Modest diversification

The 3 months correlation between PepsiCo and Oatly is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Oatly Group AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oatly Group AB 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 Oatly Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oatly Group AB has no effect on the direction of PepsiCo i.e., PepsiCo and Oatly Group go up and down completely randomly.

Pair Corralation between PepsiCo and Oatly Group

Considering the 90-day investment horizon PepsiCo is expected to generate 1.43 times less return on investment than Oatly Group. But when comparing it to its historical volatility, PepsiCo is 4.28 times less risky than Oatly Group. It trades about 0.13 of its potential returns per unit of risk. Oatly Group AB is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Oatly Group AB on February 18, 2024 and sell it today you would earn a total of  8.00  from holding Oatly Group AB or generate 6.84% return on investment over 90 days.

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

PepsiCo  vs.  Oatly Group AB

PepsiCo

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PepsiCo are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady technical and fundamental indicators, PepsiCo may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Oatly Group AB

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Oatly Group AB are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal essential indicators, Oatly Group showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and Oatly Group

The main advantage of trading using opposite PepsiCo and Oatly Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepsiCo position performs unexpectedly, Oatly Group 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 Oatly Group will offset losses from the drop in Oatly Group's long position.

The idea behind PepsiCo and Oatly Group AB 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.