Correlation Between Keurig Dr and Fevertree Drinks

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

Diversification Opportunities for Keurig Dr and Fevertree Drinks

0.43
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Keurig and Fevertree is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks 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 Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Keurig Dr i.e., Keurig Dr and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Keurig Dr and Fevertree Drinks

Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the Fevertree Drinks. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 2.37 times less risky than Fevertree Drinks. The stock trades about -0.01 of its potential returns per unit of risk. The Fevertree Drinks Plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,253  in Fevertree Drinks Plc on November 24, 2023 and sell it today you would earn a total of  57.00  from holding Fevertree Drinks Plc or generate 4.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Keurig Dr Pepper  vs.  Fevertree Drinks Plc

 Performance 
       Timeline  
Keurig Dr Pepper 

Risk-Adjusted Performance

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Low
 
High
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 relatively invariable fundamental indicators, Keurig Dr is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.
Fevertree Drinks Plc 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Fevertree Drinks Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fevertree Drinks is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Keurig Dr and Fevertree Drinks Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Keurig Dr and Fevertree Drinks

The main advantage of trading using opposite Keurig Dr and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.
The idea behind Keurig Dr Pepper and Fevertree Drinks 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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