Correlation Between Fevertree Drinks and EJF Investments
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and EJF Investments 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 EJF Investments 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 EJF Investments, you can compare the effects of market volatilities on Fevertree Drinks and EJF Investments 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 EJF Investments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and EJF Investments.
Diversification Opportunities for Fevertree Drinks and EJF Investments
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fevertree and EJF is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and EJF Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EJF Investments 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 EJF Investments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EJF Investments has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and EJF Investments go up and down completely randomly.
Pair Corralation between Fevertree Drinks and EJF Investments
Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the EJF Investments. But the stock apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 1.19 times less risky than EJF Investments. The stock trades about -0.49 of its potential returns per unit of risk. The EJF Investments is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 11,750 in EJF Investments on October 11, 2024 and sell it today you would earn a total of 800.00 from holding EJF Investments or generate 6.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fevertree Drinks Plc vs. EJF Investments
Performance |
| Timeline |
| Fevertree Drinks Plc |
| EJF Investments |
Fevertree Drinks and EJF Investments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and EJF Investments
The main advantage of trading using opposite Fevertree Drinks and EJF Investments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, EJF Investments 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 EJF Investments will offset losses from the drop in EJF Investments' long position.| Fevertree Drinks vs. Hecla Mining Co | Fevertree Drinks vs. Beowulf Mining | Fevertree Drinks vs. JD Sports Fashion | Fevertree Drinks vs. Software Circle plc |
| EJF Investments vs. Fevertree Drinks Plc | EJF Investments vs. Ecclesiastical Insurance Office | EJF Investments vs. GreenX Metals | EJF Investments vs. Associated British Foods |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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