Correlation Between Keurig Dr and Eq Energy

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

Diversification Opportunities for Keurig Dr and Eq Energy

0.43

Correlation Coefficient

Keurig Dr  Eq Energy

Very weak diversification

The 3 months correlation between Keurig and EQLB is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Eq Energy Drink in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eq Energy Drink 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 Eq Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eq Energy Drink has no effect on the direction of Keurig Dr i.e., Keurig Dr and Eq Energy go up and down completely randomly.

Pair Corralation between Keurig Dr and Eq Energy

Considering the 90-day investment horizon Keurig Dr is expected to generate 30.3 times less return on investment than Eq Energy. But when comparing it to its historical volatility, Keurig Dr Pepper is 16.8 times less risky than Eq Energy. It trades about 0.08 of its potential returns per unit of risk. Eq Energy Drink is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  0.07  in Eq Energy Drink on December 27, 2024 and sell it today you would earn a total of  0.06  from holding Eq Energy Drink or generate 85.71% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  Eq Energy Drink

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 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, Keurig Dr may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Eq Energy Drink

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eq Energy Drink are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal essential indicators, Eq Energy sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keurig Dr and Eq Energy

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

The idea behind Keurig Dr Pepper and Eq Energy Drink 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.