Correlation Between Coca Cola and Fevertree Drinks
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 Coca Cola Consolidated 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
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coca and Fevertree is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Coca Cola Consolidated 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 Coca Cola Consolidated 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
Given the investment horizon of 90 days Coca Cola Consolidated is expected to generate 2.26 times more return on investment than Fevertree Drinks. However, Coca Cola is 2.26 times more volatile than Fevertree Drinks Plc. It trades about 0.2 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.47 per unit of risk. If you would invest 119,957 in Coca Cola Consolidated on August 31, 2024 and sell it today you would earn a total of 11,283 from holding Coca Cola Consolidated or generate 9.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coca Cola Consolidated vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Coca Cola Consolidated |
| Fevertree Drinks Plc |
Coca Cola and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
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.| Coca Cola vs. Vita Coco | Coca Cola vs. PepsiCo | Coca Cola vs. The Coca Cola | Coca Cola vs. Coca Cola Femsa SAB |
| Fevertree Drinks vs. PepsiCo | Fevertree Drinks vs. Coca Cola Consolidated | Fevertree Drinks vs. Monster Beverage Corp | Fevertree Drinks vs. Celsius Holdings |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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