Correlation Between Keurig Dr and HE Equipment

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

Diversification Opportunities for Keurig Dr and HE Equipment

-0.1

Correlation Coefficient

Keurig Dr  HE Equipment

Good diversification

The 3 months correlation between Keurig and HEES is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and HE Equipment Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HE Equipment Services 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 HE Equipment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HE Equipment Services has no effect on the direction of Keurig Dr i.e., Keurig Dr and HE Equipment go up and down completely randomly.

Pair Corralation between Keurig Dr and HE Equipment

Considering the 90-day investment horizon Keurig Dr Pepper is expected to generate 0.43 times more return on investment than HE Equipment. However, Keurig Dr Pepper is 2.3 times less risky than HE Equipment. It trades about -0.58 of its potential returns per unit of risk. HE Equipment Services is currently generating about -0.61 per unit of risk. If you would invest  3,357  in Keurig Dr Pepper on October 13, 2024 and sell it today you would lose (319.00) from holding Keurig Dr Pepper or give up 9.5% of portfolio value over 90 days.

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

Keurig Dr Pepper  vs.  HE Equipment Services

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. 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.

HE Equipment Services

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HE Equipment Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Keurig Dr and HE Equipment

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

The idea behind Keurig Dr Pepper and HE Equipment Services 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.