Correlation Between Coty and Keurig Dr

Can any of the company-specific risk be diversified away by investing in both Coty 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 Coty and Keurig Dr into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Coty Inc and Keurig Dr Pepper, you can compare the effects of market volatilities on Coty 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 Coty with a short position of Keurig Dr. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coty and Keurig Dr.

Diversification Opportunities for Coty and Keurig Dr

0.85

Correlation Coefficient

Coty  Keurig Dr

Very poor diversification

The 3 months correlation between Coty and Keurig is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Coty Inc 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 Coty 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 Coty Inc 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 Coty i.e., Coty and Keurig Dr go up and down completely randomly.

Pair Corralation between Coty and Keurig Dr

Given the investment horizon of 90 days Coty is expected to generate 1.06 times less return on investment than Keurig Dr. In addition to that, Coty is 1.49 times more volatile than Keurig Dr Pepper. It trades about 0.18 of its total potential returns per unit of risk. Keurig Dr Pepper is currently generating about 0.29 per unit of volatility. If you would invest  3,124  in Keurig Dr Pepper on September 18, 2024 and sell it today you would earn a total of  188.00  from holding Keurig Dr Pepper or generate 6.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Coty Inc  vs.  Keurig Dr Pepper

Coty Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coty Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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 latest inconsistent performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Coty and Keurig Dr

The main advantage of trading using opposite Coty and Keurig Dr positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coty 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 Coty Inc 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.