Correlation Between Fevertree Drinks and Southwest Airlines
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and Southwest Airlines 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 Southwest Airlines 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 Southwest Airlines Co, you can compare the effects of market volatilities on Fevertree Drinks and Southwest Airlines 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 Southwest Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and Southwest Airlines.
Diversification Opportunities for Fevertree Drinks and Southwest Airlines
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fevertree and Southwest is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Southwest Airlines Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southwest Airlines 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 Southwest Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southwest Airlines has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Southwest Airlines go up and down completely randomly.
Pair Corralation between Fevertree Drinks and Southwest Airlines
Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the Southwest Airlines. But the stock apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 1.01 times less risky than Southwest Airlines. The stock trades about -0.03 of its potential returns per unit of risk. The Southwest Airlines Co is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 3,078 in Southwest Airlines Co on September 24, 2024 and sell it today you would earn a total of 252.00 from holding Southwest Airlines Co or generate 8.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.4% |
| Values | Daily Returns |
Fevertree Drinks Plc vs. Southwest Airlines Co
Performance |
| Timeline |
| Fevertree Drinks Plc |
| Southwest Airlines |
Fevertree Drinks and Southwest Airlines Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and Southwest Airlines
The main advantage of trading using opposite Fevertree Drinks and Southwest Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, Southwest Airlines 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 Southwest Airlines will offset losses from the drop in Southwest Airlines' long position.| Fevertree Drinks vs. Roebuck Food Group | Fevertree Drinks vs. Austevoll Seafood ASA | Fevertree Drinks vs. Induction Healthcare Group | Fevertree Drinks vs. Hilton Food Group |
| Southwest Airlines vs. Science in Sport | Southwest Airlines vs. JD Sports Fashion | Southwest Airlines vs. G5 Entertainment AB | Southwest Airlines vs. Fevertree Drinks Plc |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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