Correlation Between Wasatch Small and Keurig

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

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

Diversification Opportunities for Wasatch Small and Keurig

-0.43

Correlation Coefficient

Wasatch Small  Keurig

Very good diversification

The 3 months correlation between Wasatch and Keurig is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Wasatch Small Cap 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 Wasatch Small 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 Wasatch Small Cap 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 Wasatch Small i.e., Wasatch Small and Keurig go up and down completely randomly.

Pair Corralation between Wasatch Small and Keurig

Assuming the 90 days horizon Wasatch Small Cap is expected to generate 4.66 times more return on investment than Keurig. However, Wasatch Small is 4.66 times more volatile than Keurig Dr Pepper. It trades about 0.11 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  4,038  in Wasatch Small Cap on September 28, 2024 and sell it today you would earn a total of  332.00  from holding Wasatch Small Cap or generate 8.22% return on investment over 90 days.

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

Wasatch Small Cap  vs.  Keurig Dr Pepper

Wasatch Small Cap

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wasatch Small Cap are ranked lower than 8 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak technical and fundamental indicators, Wasatch Small may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Wasatch Small and Keurig

The main advantage of trading using opposite Wasatch Small and Keurig positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wasatch Small 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 Wasatch Small Cap 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.