Correlation Between American States and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both American States 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 American States and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American States Water and Fevertree Drinks PLC, you can compare the effects of market volatilities on American States 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 American States with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of American States and Fevertree Drinks.
Diversification Opportunities for American States and Fevertree Drinks
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between American and Fevertree is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding American States Water 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 American States 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 American States Water 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 American States i.e., American States and Fevertree Drinks go up and down completely randomly.
Pair Corralation between American States and Fevertree Drinks
Assuming the 90 days horizon American States Water is expected to under-perform the Fevertree Drinks. But the stock apears to be less risky and, when comparing its historical volatility, American States Water is 1.62 times less risky than Fevertree Drinks. The stock trades about -0.07 of its potential returns per unit of risk. The Fevertree Drinks PLC is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 850.00 in Fevertree Drinks PLC on September 14, 2024 and sell it today you would earn a total of 5.00 from holding Fevertree Drinks PLC or generate 0.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
American States Water vs. Fevertree Drinks PLC
Performance |
| Timeline |
| American States Water |
| Fevertree Drinks PLC |
American States and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American States and Fevertree Drinks
The main advantage of trading using opposite American States and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American States 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.| American States vs. ARISTOCRAT LEISURE | American States vs. AUSTEVOLL SEAFOOD | American States vs. HF FOODS GRP | American States vs. Playtech plc |
| Fevertree Drinks vs. Public Storage | Fevertree Drinks vs. GALENA MINING LTD | Fevertree Drinks vs. Pure Storage | Fevertree Drinks vs. Clean Energy Fuels |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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