Correlation Between Keurig Dr and Coca-Cola FEMSA

Can any of the company-specific risk be diversified away by investing in both Keurig Dr and Coca-Cola FEMSA 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 FEMSA 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 Coca Cola FEMSA SAB, you can compare the effects of market volatilities on Keurig Dr and Coca-Cola FEMSA 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 FEMSA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keurig Dr and Coca-Cola FEMSA.

Diversification Opportunities for Keurig Dr and Coca-Cola FEMSA

0.44

Correlation Coefficient

Keurig Dr  Coca-Cola FEMSA

Very weak diversification

The 3 months correlation between Keurig and Coca-Cola is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Coca Cola FEMSA SAB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coca Cola FEMSA 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 FEMSA. 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 FEMSA has no effect on the direction of Keurig Dr i.e., Keurig Dr and Coca-Cola FEMSA go up and down completely randomly.

Pair Corralation between Keurig Dr and Coca-Cola FEMSA

Assuming the 90 days horizon Keurig Dr Pepper is expected to under-perform the Coca-Cola FEMSA. In addition to that, Keurig Dr is 1.0 times more volatile than Coca Cola FEMSA SAB. It trades about -0.42 of its total potential returns per unit of risk. Coca Cola FEMSA SAB is currently generating about -0.34 per unit of volatility. If you would invest  7,700  in Coca Cola FEMSA SAB on October 15, 2024 and sell it today you would lose (400.00) from holding Coca Cola FEMSA SAB or give up 5.19% of portfolio value over 90 days.

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

Keurig Dr Pepper  vs.  Coca Cola FEMSA SAB

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Coca Cola FEMSA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coca Cola FEMSA SAB has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Keurig Dr and Coca-Cola FEMSA

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

The idea behind Keurig Dr Pepper and Coca Cola FEMSA SAB 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.