Correlation Between Keurig Dr and DNA Brands

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

Diversification Opportunities for Keurig Dr and DNA Brands

0.06

Correlation Coefficient

Keurig Dr  DNA Brands

Significant diversification

The 3 months correlation between Keurig and DNA is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and DNA Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNA Brands 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 DNA Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNA Brands has no effect on the direction of Keurig Dr i.e., Keurig Dr and DNA Brands go up and down completely randomly.

Pair Corralation between Keurig Dr and DNA Brands

Considering the 90-day investment horizon Keurig Dr is expected to generate 18.4 times less return on investment than DNA Brands. But when comparing it to its historical volatility, Keurig Dr Pepper is 21.92 times less risky than DNA Brands. It trades about 0.17 of its potential returns per unit of risk. DNA Brands is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.01  in DNA Brands on December 10, 2024 and sell it today you would earn a total of  0.00  from holding DNA Brands or generate 0.0% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  DNA Brands

Keurig Dr Pepper

Risk-Adjusted Performance

Very Weak

Over the last 90 days Keurig Dr Pepper has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, Keurig Dr is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

DNA Brands

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DNA Brands are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, DNA Brands showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keurig Dr and DNA Brands

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

The idea behind Keurig Dr Pepper and DNA Brands 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.