Correlation Between Keurig Dr and Smurfit WestRock

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

Diversification Opportunities for Keurig Dr and Smurfit WestRock

-0.5

Correlation Coefficient

Keurig Dr  Smurfit WestRock

Very good diversification

The 3 months correlation between Keurig and Smurfit is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Smurfit WestRock plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Smurfit WestRock 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 Smurfit WestRock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Smurfit WestRock plc has no effect on the direction of Keurig Dr i.e., Keurig Dr and Smurfit WestRock go up and down completely randomly.

Pair Corralation between Keurig Dr and Smurfit WestRock

Considering the 90-day investment horizon Keurig Dr Pepper is expected to generate 0.58 times more return on investment than Smurfit WestRock. However, Keurig Dr Pepper is 1.71 times less risky than Smurfit WestRock. It trades about 0.09 of its potential returns per unit of risk. Smurfit WestRock plc is currently generating about -0.11 per unit of risk. If you would invest  3,204  in Keurig Dr Pepper on December 27, 2024 and sell it today you would earn a total of  221.00  from holding Keurig Dr Pepper or generate 6.9% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  Smurfit WestRock plc

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.

Smurfit WestRock plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Smurfit WestRock plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Keurig Dr and Smurfit WestRock

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

The idea behind Keurig Dr Pepper and Smurfit WestRock 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.