Correlation Between Associated British and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Associated British 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 Associated British and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Associated British Foods and Fevertree Drinks Plc, you can compare the effects of market volatilities on Associated British 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 Associated British with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Associated British and Fevertree Drinks.
Diversification Opportunities for Associated British and Fevertree Drinks
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Associated and Fevertree is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Associated British Foods 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 Associated British 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 Associated British Foods 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 Associated British i.e., Associated British and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Associated British and Fevertree Drinks
Assuming the 90 days trading horizon Associated British Foods is expected to generate 0.62 times more return on investment than Fevertree Drinks. However, Associated British Foods is 1.61 times less risky than Fevertree Drinks. It trades about -0.01 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.06 per unit of risk. If you would invest 232,209 in Associated British Foods on August 27, 2024 and sell it today you would lose (12,509) from holding Associated British Foods or give up 5.39% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Associated British Foods vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Associated British Foods |
| Fevertree Drinks Plc |
Associated British and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Associated British and Fevertree Drinks
The main advantage of trading using opposite Associated British and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Associated British 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.| Associated British vs. Ryanair Holdings plc | Associated British vs. Pets at Home | Associated British vs. Synthomer plc | Associated British vs. National Beverage Corp |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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