Various Seasonality

The Seasonal Changes in Coca-Cola and PepsiCo Stocks' Value

Elena Berseneva 11 January 2022 244 4

The aim of this article is to reveal seasonal changes in Coca-Cola Company and PepsiCo Inc stocks' value.

Hypothesis
To conclusion

Coca-Cola Company and PepsiCo stocks are subject to seasonality (or seasonal fluctuations) over different periods of the year.

To conclusion



We suggest using the following criteria to reveal seasonal fluctuations:


  1. The proportion of unidirectional increments cases of daily deltas within a month for a period of at least 10 years should be more than 53%.
  2. The ratio between average values of positive and negative increments in the daytime should correspond to the monthly price increments. That is, this condition is satisfied if, given the share of positive daily increments over 50%, the value is greater than 1.
  3. The linear trend in the distribution of monthly deltas should be towards unidirectional increments growth over the past 10 years.


If the aforementioned criteria are met, we can make assumptions about seasonal price fluctuations in financial instrument.

Data used

The raw data include:


  • historical data on Coca-Cola Company shares over the period from March 1980 to May 2019 (KO ticker).

The sample makes up 9 872 values.


  • historical data on PepsiCo Inc shares (PEP ticker) over the period from March 1980 to May 2019.

The sample makes up 9 872 values.


Heat map reflecting the changes in Coca-Cola Company stocks' value.

Explanation of the bottom lines:


  • the first line reflects the proportion of unidirectional increments cases calculated from the analysis of daily price changes. For example, we take all 30 days in April over 39 years and get 827 days. 481 out of 827 saw growth in prices. So, the share of cases where growth was seen is 58.2%.
  • in the second line, we compare the average value of all positive daily increments by every month to the average value of negative increments. If the value is > 1, it means that the price passes through more points on the days of growth than on the days of declines.


Revealing the seasonality through daily increment analysis is a more sensitive method aimed at filtering out extremely high growth or decline in quotes on particular days.



As can be seen from the results obtained, four months (April, May, August and November) meet two of the three criteria of marked seasonality. In April, May and November, prices rise, and in August, prices fall. Now let's check these months applying the third criterion, i.e. the direction of the linear trend of the delta values (over the entire observation period and separately over the last 10 years).

As can be seen on the charts, the seasonality in April price growth results from a month-specific increment distribution (both on average over 29 years and over the last 10 years).


There is a decrease in May price, which does not meet the last criterion.


The linear trend in August is downward in both timeframes, confirming the seasonality in this month.


The linear trend of November increments is downward, therefore, the seasonal fluctuations in product pricing are obviously absent.


March and November data do not offer confirmation to seasonality either.


Hence, with some degree of confidence we can speak of the evident seasonal fluctuations in Coca-Cola Company stocks' prices in April (growth) and August (decline).



Now let's turn to the similar subject of PepsiCo Inc. value.

The results given in the stock price heat map suggest that we look more closely at January, February, March, April, May, August, November and December.


The results on these months meet two seasonality criteria.


All of the above-mentioned months experience growth in prices, except August, which shows a decline in prices.



Let's see the trends inherent in distributions of price increments.

Price increase is the third criterion of seasonal fluctuations in January and February.


March, April, and May charts illustrate that the linear trend direction of deltas does not meet the last criterion.


August is featured with lower prices. Conversely, November is characterised with a price increase, so these two months meet the third criterion of seasonal fluctuations.


The linear trend of the December increments is downward towards the zero line, indicating that these data do not meet the last criterion of seasonal fluctuations.



To better show the way how seasonal patterns appear, we graphically illustrate the algorithm of our actions on step-by-step charts.



Step 1.


We determine the proportion of cases when prices mostly rose or fell. Green months – growth. Red months – decrease.


Step 2.


We calculate the ratio of average positive price increments to average negative ones based on the number of months at first step.

As you can see, we excluded December, February and March from Coca-Cola company when applying the second step filter. September has not been selected for analyzing further seasonality of Pepsi.



Step 3.


The last filter that assesses the linear trend of price increments over the last 10 years and compares it with the revealed seasonality at the 1st and the 2nd steps of our selection.



Filtering by the last selection criterion we get the following final picture depicting the seasonality.

Conclusion

Thus, we are convinced of seasonal patterns relating to the Coca-Cola Company and PepsiCo Inc. stocks' values.

We see seasonal trends in stocks' values in January, February, April, August and November.


The Coca-Cola Company has seasonal uptrends in the stocks' value in April and downtrends in August.


PepsiCo Inc has a seasonal rise in stocks' value in January, February and November, and a fall similar to Coca-Cola in August.


We can note the seasonal similarity of these two companies, i.e. the growth in stocks' value by the end of the winter months and in early spring, before summertime.

The decline in stocks' value occurs in August at summer season closing, which is natural for fizzy drinks companies.



We have revealed seasonal changes in Coca-Cola Company and PepsiCo Inc stocks' values.

XLSX (0.49 MB)Coca-Cola.xlsxXLSX (0.54 MB)PepsiCo.xlsxXLSX (0.04 MB)Charts.xlsx

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