Correlation Between Keurig and Relx PLC

Can any of the company-specific risk be diversified away by investing in both Keurig and Relx PLC 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 and Relx PLC 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 Relx PLC ADR, you can compare the effects of market volatilities on Keurig and Relx PLC 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 with a short position of Relx PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keurig and Relx PLC.

Diversification Opportunities for Keurig and Relx PLC

0.21

Correlation Coefficient

Keurig  Relx PLC

Modest diversification

The 3 months correlation between Keurig and Relx is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Relx PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relx PLC ADR and Keurig 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 Relx PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relx PLC ADR has no effect on the direction of Keurig i.e., Keurig and Relx PLC go up and down completely randomly.

Pair Corralation between Keurig and Relx PLC

Assuming the 90 days trading horizon Keurig Dr Pepper is expected to generate 0.24 times more return on investment than Relx PLC. However, Keurig Dr Pepper is 4.25 times less risky than Relx PLC. It trades about -0.19 of its potential returns per unit of risk. Relx PLC ADR is currently generating about -0.05 per unit of risk. If you would invest  10,146  in Keurig Dr Pepper on September 29, 2024 and sell it today you would lose (295.00) from holding Keurig Dr Pepper or give up 2.91% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Keurig Dr Pepper  vs.  Relx PLC ADR

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 current stock price disturbance, may contribute to short-term losses for the investors.

Relx PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relx PLC ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong essential indicators, Relx PLC is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Keurig and Relx PLC

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

The idea behind Keurig Dr Pepper and Relx PLC ADR 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.