Correlation Between Keurig Dr and KINDER

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

Diversification Opportunities for Keurig Dr and KINDER

0.08

Correlation Coefficient

Keurig Dr  KINDER

Significant diversification

The 3 months correlation between Keurig and KINDER is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY 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 KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of Keurig Dr i.e., Keurig Dr and KINDER go up and down completely randomly.

Pair Corralation between Keurig Dr and KINDER

Considering the 90-day investment horizon Keurig Dr Pepper is expected to generate 1.21 times more return on investment than KINDER. However, Keurig Dr is 1.21 times more volatile than KINDER MORGAN ENERGY. It trades about 0.06 of its potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about 0.03 per unit of risk. If you would invest  3,202  in Keurig Dr Pepper on December 23, 2024 and sell it today you would earn a total of  153.00  from holding Keurig Dr Pepper or generate 4.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Keurig Dr Pepper  vs.  KINDER MORGAN ENERGY

Keurig Dr Pepper

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keurig Dr Pepper are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, Keurig Dr is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KINDER MORGAN ENERGY are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Keurig Dr and KINDER

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

The idea behind Keurig Dr Pepper and KINDER MORGAN ENERGY 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.