Correlation Between Keurig Dr and Fevertree Drinks

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

Diversification Opportunities for Keurig Dr and Fevertree Drinks

KeurigFevertreeDiversified AwayKeurigFevertreeDiversified Away100%
0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Keurig and Fevertree is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Keurig Dr i.e., Keurig Dr and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Keurig Dr and Fevertree Drinks

Considering the 90-day investment horizon Keurig Dr Pepper is expected to generate 0.81 times more return on investment than Fevertree Drinks. However, Keurig Dr Pepper is 1.23 times less risky than Fevertree Drinks. It trades about -0.2 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.27 per unit of risk. If you would invest  3,637  in Keurig Dr Pepper on October 16, 2024 and sell it today you would lose (559.00) from holding Keurig Dr Pepper or give up 15.37% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Keurig Dr Pepper  vs.  Fevertree Drinks Plc

 Performance 
JavaScript chart by amCharts 3.21.15NovDec -20-15-10-50
JavaScript chart by amCharts 3.21.15KDP FQVTF
       Timeline  
Keurig Dr Pepper 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 inconsistent performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan3031323334353637
Fevertree Drinks Plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fevertree Drinks Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.
JavaScript chart by amCharts 3.21.15NovDecJanDecJan7.588.599.510

Keurig Dr and Fevertree Drinks Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.31-1.79-1.27-0.75-0.230.240.761.281.82.32 0.100.150.20
JavaScript chart by amCharts 3.21.15KDP FQVTF
       Returns  

Pair Trading with Keurig Dr and Fevertree Drinks

The main advantage of trading using opposite Keurig Dr and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.
The idea behind Keurig Dr Pepper and Fevertree Drinks Plc 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.

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