Correlation Between Keurig Dr and NL Industries
Can any of the company-specific risk be diversified away by investing in both Keurig Dr and NL Industries 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 NL Industries 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 NL Industries, you can compare the effects of market volatilities on Keurig Dr and NL Industries 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 NL Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Keurig Dr and NL Industries.
Diversification Opportunities for Keurig Dr and NL Industries
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Keurig and NL Industries is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and NL Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NL Industries 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 NL Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NL Industries has no effect on the direction of Keurig Dr i.e., Keurig Dr and NL Industries go up and down completely randomly.
Pair Corralation between Keurig Dr and NL Industries
Considering the 90-day investment horizon Keurig Dr Pepper is expected to generate 0.71 times more return on investment than NL Industries. However, Keurig Dr Pepper is 1.41 times less risky than NL Industries. It trades about 0.05 of its potential returns per unit of risk. NL Industries is currently generating about -0.02 per unit of risk. If you would invest 3,320 in Keurig Dr Pepper on September 12, 2024 and sell it today you would earn a total of 40.00 from holding Keurig Dr Pepper or generate 1.2% 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. NL Industries
Performance |
| Timeline |
| Keurig Dr Pepper |
| NL Industries |
Keurig Dr and NL Industries Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Keurig Dr and NL Industries
The main advantage of trading using opposite Keurig Dr and NL Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Keurig Dr position performs unexpectedly, NL Industries 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 NL Industries will offset losses from the drop in NL Industries' long position.| Keurig Dr vs. Celsius Holdings | Keurig Dr vs. Vita Coco | Keurig Dr vs. PepsiCo | Keurig Dr vs. Coca Cola Femsa SAB |
| NL Industries vs. Brinks Company | NL Industries vs. Allegion PLC | NL Industries vs. Resideo Technologies | NL Industries vs. Mistras Group |
Check out your portfolio center.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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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