Correlation Between Fevertree Drinks and BOSTON BEER

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

By analyzing existing cross correlation between Fevertree Drinks PLC and BOSTON BEER A , you can compare the effects of market volatilities on Fevertree Drinks and BOSTON BEER 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 Fevertree Drinks with a short position of BOSTON BEER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and BOSTON BEER.

Diversification Opportunities for Fevertree Drinks and BOSTON BEER

-0.57

Correlation Coefficient

Fevertree Drinks  BOSTON BEER

Excellent diversification

The 3 months correlation between Fevertree and BOSTON is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks PLC and BOSTON BEER A in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOSTON BEER A and Fevertree Drinks 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 Fevertree Drinks PLC are associated (or correlated) with BOSTON BEER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOSTON BEER A has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and BOSTON BEER go up and down completely randomly.

Pair Corralation between Fevertree Drinks and BOSTON BEER

Assuming the 90 days trading horizon Fevertree Drinks PLC is expected to generate 0.86 times more return on investment than BOSTON BEER. However, Fevertree Drinks PLC is 1.17 times less risky than BOSTON BEER. It trades about 0.14 of its potential returns per unit of risk. BOSTON BEER A is currently generating about 0.02 per unit of risk. If you would invest  1,260  in Fevertree Drinks PLC on February 14, 2024 and sell it today you would earn a total of  80.00  from holding Fevertree Drinks PLC or generate 6.35% return on investment over 90 days.

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

Fevertree Drinks PLC  vs.  BOSTON BEER A

Fevertree Drinks PLC

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks PLC are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Fevertree Drinks unveiled solid returns over the last few months and may actually be approaching a breakup point.

BOSTON BEER A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BOSTON BEER A has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in June 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fevertree Drinks and BOSTON BEER

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

The idea behind Fevertree Drinks PLC and BOSTON BEER A 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.