Correlation Between Keurig Dr and GameStop Corp

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

Diversification Opportunities for Keurig Dr and GameStop Corp

-0.75

Correlation Coefficient

Keurig Dr  GameStop Corp

Pay attention - limited upside

The 3 months correlation between Keurig and GameStop is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and GameStop Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GameStop Corp 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 GameStop Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GameStop Corp has no effect on the direction of Keurig Dr i.e., Keurig Dr and GameStop Corp go up and down completely randomly.

Pair Corralation between Keurig Dr and GameStop Corp

Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the GameStop Corp. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 6.81 times less risky than GameStop Corp. The stock trades about -0.01 of its potential returns per unit of risk. The GameStop Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  1,638  in GameStop Corp on September 28, 2024 and sell it today you would earn a total of  1,502  from holding GameStop Corp or generate 91.7% return on investment over 90 days.

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

Keurig Dr Pepper  vs.  GameStop Corp

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.

GameStop Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in GameStop Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain primary indicators, GameStop Corp exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keurig Dr and GameStop Corp

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

The idea behind Keurig Dr Pepper and GameStop Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..