Correlation Between Keurig Dr and Coca Cola

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

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

Diversification Opportunities for Keurig Dr and Coca Cola

0.91

Correlation Coefficient

Keurig Dr  Coca Cola

Almost no diversification

The 3 months correlation between Keurig and Coca is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and The Coca Cola in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola and Keurig Dr 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 Keurig Dr Pepper are associated (or correlated) with Coca Cola. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coca Cola has no effect on the direction of Keurig Dr i.e., Keurig Dr and Coca Cola go up and down completely randomly.

Pair Corralation between Keurig Dr and Coca Cola

Assuming the 90 days horizon Keurig Dr Pepper is expected to generate 0.71 times more return on investment than Coca Cola. However, Keurig Dr Pepper is 1.4 times less risky than Coca Cola. It trades about -0.04 of its potential returns per unit of risk. The Coca Cola is currently generating about -0.06 per unit of risk. If you would invest  3,113  in Keurig Dr Pepper on September 26, 2024 and sell it today you would lose (26.00) from holding Keurig Dr Pepper or give up 0.84% of portfolio value over 90 days.

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

Keurig Dr Pepper  vs.  The Coca Cola

Keurig Dr Pepper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keurig Dr Pepper has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Keurig Dr is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Coca Cola

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days The Coca Cola has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Keurig Dr and Coca Cola

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

The idea behind Keurig Dr Pepper and The Coca Cola 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.