Correlation Between Coca Cola and Keurig Dr

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and Keurig Dr 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 Coca Cola and Keurig Dr into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coca Cola Femsa SAB and Keurig Dr Pepper, you can compare the effects of market volatilities on Coca Cola and Keurig Dr 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 Coca Cola with a short position of Keurig Dr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Keurig Dr.

Diversification Opportunities for Coca Cola and Keurig Dr

-0.48
  Correlation Coefficient

Very good diversification

The 3 months correlation between Coca and Keurig is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Femsa SAB and Keurig Dr Pepper in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keurig Dr Pepper and Coca Cola 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 Coca Cola Femsa SAB are associated (or correlated) with Keurig Dr. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keurig Dr Pepper has no effect on the direction of Coca Cola i.e., Coca Cola and Keurig Dr go up and down completely randomly.

Pair Corralation between Coca Cola and Keurig Dr

Considering the 90-day investment horizon Coca Cola Femsa SAB is expected to under-perform the Keurig Dr. In addition to that, Coca Cola is 1.33 times more volatile than Keurig Dr Pepper. It trades about -0.08 of its total potential returns per unit of risk. Keurig Dr Pepper is currently generating about 0.17 per unit of volatility. If you would invest  2,930  in Keurig Dr Pepper on January 17, 2024 and sell it today you would earn a total of  113.00  from holding Keurig Dr Pepper or generate 3.86% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Coca Cola Femsa SAB  vs.  Keurig Dr Pepper

 Performance 
       Timeline  
Coca Cola Femsa 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Coca Cola Femsa SAB are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Coca Cola is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.
Keurig Dr Pepper 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 recent stock price agitation, may contribute to short-term losses for the retail investors.

Coca Cola and Keurig Dr Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Coca Cola and Keurig Dr

The main advantage of trading using opposite Coca Cola and Keurig Dr positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Keurig Dr 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 Keurig Dr will offset losses from the drop in Keurig Dr's long position.
The idea behind Coca Cola Femsa SAB and Keurig Dr Pepper 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.
Check out your portfolio center.
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.

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