Correlation Between Coca Cola and Fevertree Drinks

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Can any of the company-specific risk be diversified away by investing in both Coca Cola and Fevertree Drinks 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 Coca Cola and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The Coca Cola and Fevertree Drinks Plc, you can compare the effects of market volatilities on Coca Cola and Fevertree Drinks 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 Coca Cola with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coca Cola and Fevertree Drinks.

Diversification Opportunities for Coca Cola and Fevertree Drinks

  Correlation Coefficient

Very good diversification

The 3 months correlation between Coca and Fevertree is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding The Coca-Cola and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc and Coca Cola 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 The Coca Cola are associated (or correlated) with Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Coca Cola i.e., Coca Cola and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Coca Cola and Fevertree Drinks

Allowing for the 90-day total investment horizon Coca Cola is expected to generate 2.14 times less return on investment than Fevertree Drinks. But when comparing it to its historical volatility, The Coca Cola is 2.74 times less risky than Fevertree Drinks. It trades about 0.12 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,253  in Fevertree Drinks Plc on November 24, 2023 and sell it today you would earn a total of  57.00  from holding Fevertree Drinks Plc or generate 4.55% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
ValuesDaily Returns

The Coca-Cola  vs.  Fevertree Drinks Plc


Risk-Adjusted Performance

7 of 100

Compared to the overall equity markets, risk-adjusted returns on investments in The Coca Cola are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Coca Cola is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Fevertree Drinks Plc 

Risk-Adjusted Performance

0 of 100

Very Weak
Over the last 90 days Fevertree Drinks Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Fevertree Drinks is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Coca Cola and Fevertree Drinks Volatility Contrast

   Predicted Return Density   

Pair Trading with Coca Cola and Fevertree Drinks

The main advantage of trading using opposite Coca Cola and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coca Cola position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.
The idea behind The Coca Cola and Fevertree Drinks Plc 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..

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