Correlation Between Keurig Dr and Primo Water

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

Diversification Opportunities for Keurig Dr and Primo Water

0.28

Correlation Coefficient

Keurig Dr  Primo Water

Modest diversification

The 3 months correlation between Keurig and Primo is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Keurig Dr Pepper and Primo Water Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Water Corp 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 Primo Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Water Corp has no effect on the direction of Keurig Dr i.e., Keurig Dr and Primo Water go up and down completely randomly.

Pair Corralation between Keurig Dr and Primo Water

Considering the 90-day investment horizon Keurig Dr is expected to generate 1.06 times less return on investment than Primo Water. In addition to that, Keurig Dr is 1.27 times more volatile than Primo Water Corp. It trades about 0.28 of its total potential returns per unit of risk. Primo Water Corp is currently generating about 0.38 per unit of volatility. If you would invest  1,806  in Primo Water Corp on February 3, 2024 and sell it today you would earn a total of  159.00  from holding Primo Water Corp or generate 8.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Keurig Dr Pepper  vs.  Primo Water Corp

Keurig Dr Pepper

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Keurig Dr Pepper are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent fundamental indicators, Keurig Dr may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Primo Water Corp

Risk-Adjusted Performance

33 of 100

Very Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Water Corp are ranked lower than 33 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Primo Water showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Keurig Dr and Primo Water

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

The idea behind Keurig Dr Pepper and Primo Water Corp 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.