Correlation Between Keurig Dr and Kontoor Brands

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

Diversification Opportunities for Keurig Dr and Kontoor Brands

-0.63

Correlation Coefficient

Keurig Dr  Kontoor Brands

Excellent diversification

The 3 months correlation between Keurig and Kontoor is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Kontoor Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kontoor 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 Kontoor Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kontoor Brands has no effect on the direction of Keurig Dr i.e., Keurig Dr and Kontoor Brands go up and down completely randomly.

Pair Corralation between Keurig Dr and Kontoor Brands

Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the Kontoor Brands. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 1.92 times less risky than Kontoor Brands. The stock trades about -0.16 of its potential returns per unit of risk. The Kontoor Brands is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  7,223  in Kontoor Brands on September 4, 2024 and sell it today you would earn a total of  2,196  from holding Kontoor Brands or generate 30.4% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  Kontoor Brands

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 latest inconsistent performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Kontoor Brands

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kontoor Brands are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Kontoor Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keurig Dr and Kontoor Brands

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

The idea behind Keurig Dr Pepper and Kontoor 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.