Correlation Between Keurig Dr and Universal Music

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

Diversification Opportunities for Keurig Dr and Universal Music

0.68

Correlation Coefficient

Keurig Dr  Universal Music

Poor diversification

The 3 months correlation between Keurig and Universal is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Universal Music Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Music Group 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 Universal Music. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Music Group has no effect on the direction of Keurig Dr i.e., Keurig Dr and Universal Music go up and down completely randomly.

Pair Corralation between Keurig Dr and Universal Music

Considering the 90-day investment horizon Keurig Dr is expected to generate 8.83 times less return on investment than Universal Music. But when comparing it to its historical volatility, Keurig Dr Pepper is 2.57 times less risky than Universal Music. It trades about 0.05 of its potential returns per unit of risk. Universal Music Group is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,370  in Universal Music Group on September 21, 2024 and sell it today you would earn a total of  219.00  from holding Universal Music Group or generate 9.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

Keurig Dr Pepper  vs.  Universal Music Group

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 January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Universal Music Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Universal Music Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Universal Music is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Keurig Dr and Universal Music

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

The idea behind Keurig Dr Pepper and Universal Music Group 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.