Correlation Between Coca-Cola European and Keurig Dr

Can any of the company-specific risk be diversified away by investing in both Coca-Cola European and Keurig Dr 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 Coca-Cola European and Keurig Dr into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coca Cola European Partners and Keurig Dr Pepper, you can compare the effects of market volatilities on Coca-Cola European and Keurig Dr 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 Coca-Cola European with a short position of Keurig Dr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca-Cola European and Keurig Dr.

Diversification Opportunities for Coca-Cola European and Keurig Dr

0.55

Correlation Coefficient

Coca-Cola European  Keurig Dr

Very weak diversification

The 3 months correlation between Coca-Cola and Keurig is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola European Partners and Keurig Dr Pepper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keurig Dr Pepper and Coca-Cola European 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 Coca Cola European Partners are associated (or correlated) with Keurig Dr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keurig Dr Pepper has no effect on the direction of Coca-Cola European i.e., Coca-Cola European and Keurig Dr go up and down completely randomly.

Pair Corralation between Coca-Cola European and Keurig Dr

Assuming the 90 days horizon Coca Cola European Partners is expected to generate 1.24 times more return on investment than Keurig Dr. However, Coca-Cola European is 1.24 times more volatile than Keurig Dr Pepper. It trades about 0.13 of its potential returns per unit of risk. Keurig Dr Pepper is currently generating about 0.07 per unit of risk. If you would invest  7,190  in Coca Cola European Partners on December 2, 2024 and sell it today you would earn a total of  1,010  from holding Coca Cola European Partners or generate 14.05% return on investment over 90 days.

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

Coca Cola European Partners  vs.  Keurig Dr Pepper

Coca Cola European

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola European Partners are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Coca-Cola European reported solid returns over the last few months and may actually be approaching a breakup point.

Keurig Dr Pepper

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Keurig Dr Pepper are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Keurig Dr may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Coca-Cola European and Keurig Dr

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

The idea behind Coca Cola European Partners and Keurig Dr Pepper 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.