Correlation Between Keurig Dr and CBOE Volatility

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

Diversification Opportunities for Keurig Dr and CBOE Volatility

0.36

Correlation Coefficient

Keurig Dr  CBOE Volatility

Weak diversification

The 3 months correlation between Keurig and CBOE is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and CBOE Volatility Index in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBOE Volatility Index 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 CBOE Volatility. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBOE Volatility Index has no effect on the direction of Keurig Dr i.e., Keurig Dr and CBOE Volatility go up and down completely randomly.

Pair Corralation between Keurig Dr and CBOE Volatility

Considering the 90-day investment horizon Keurig Dr Pepper is expected to under-perform the CBOE Volatility. But the stock apears to be less risky and, when comparing its historical volatility, Keurig Dr Pepper is 4.99 times less risky than CBOE Volatility. The stock trades about -0.14 of its potential returns per unit of risk. The CBOE Volatility Index is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,823  in CBOE Volatility Index on September 18, 2024 and sell it today you would lose (354.00) from holding CBOE Volatility Index or give up 19.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Keurig Dr Pepper  vs.  CBOE Volatility Index

Pair Trading with Keurig Dr and CBOE Volatility

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

The idea behind Keurig Dr Pepper and CBOE Volatility Index 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..