Correlation Between Keurig Dr and Modine Manufacturing

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

Diversification Opportunities for Keurig Dr and Modine Manufacturing

0.28

Correlation Coefficient

Keurig Dr  Modine Manufacturing

Modest diversification

The 3 months correlation between Keurig and Modine is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Modine Manufacturing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Modine Manufacturing 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 Modine Manufacturing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Modine Manufacturing has no effect on the direction of Keurig Dr i.e., Keurig Dr and Modine Manufacturing go up and down completely randomly.

Pair Corralation between Keurig Dr and Modine Manufacturing

Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the Modine Manufacturing. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 3.84 times less risky than Modine Manufacturing. The stock trades about -0.39 of its potential returns per unit of risk. The Modine Manufacturing is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  12,957  in Modine Manufacturing on October 8, 2024 and sell it today you would lose (713.00) from holding Modine Manufacturing or give up 5.5% of portfolio value over 90 days.

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

Keurig Dr Pepper  vs.  Modine Manufacturing

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.

Modine Manufacturing

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Modine Manufacturing has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Modine Manufacturing is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Keurig Dr and Modine Manufacturing

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

The idea behind Keurig Dr Pepper and Modine Manufacturing 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.