Correlation Between Ultra Short and Keurig

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

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

Diversification Opportunities for Ultra Short and Keurig

-0.52

Correlation Coefficient

Ultra Short  Keurig

Excellent diversification

The 3 months correlation between Ultra and Keurig is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Ultra Short Term Bond 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 Ultra Short 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 Ultra Short Term Bond are associated (or correlated) with Keurig. 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 Ultra Short i.e., Ultra Short and Keurig go up and down completely randomly.

Pair Corralation between Ultra Short and Keurig

Assuming the 90 days horizon Ultra Short Term Bond is expected to generate 0.31 times more return on investment than Keurig. However, Ultra Short Term Bond is 3.19 times less risky than Keurig. It trades about 0.04 of its potential returns per unit of risk. Keurig Dr Pepper is currently generating about -0.19 per unit of risk. If you would invest  1,005  in Ultra Short Term Bond on September 28, 2024 and sell it today you would earn a total of  2.00  from holding Ultra Short Term Bond or generate 0.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

Ultra Short Term Bond  vs.  Keurig Dr Pepper

Ultra Short Term

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ultra Short Term Bond are ranked lower than 3 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong basic indicators, Ultra Short is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the 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. Despite somewhat strong basic indicators, Keurig is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Ultra Short and Keurig

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

The idea behind Ultra Short Term Bond 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 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..