Correlation Between Fevertree Drinks and Rockfire Resources
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and Rockfire Resources 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 Rockfire Resources 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 Rockfire Resources plc, you can compare the effects of market volatilities on Fevertree Drinks and Rockfire Resources 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 Rockfire Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and Rockfire Resources.
Diversification Opportunities for Fevertree Drinks and Rockfire Resources
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fevertree and Rockfire is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Rockfire Resources plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rockfire Resources plc 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 Rockfire Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rockfire Resources plc has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Rockfire Resources go up and down completely randomly.
Pair Corralation between Fevertree Drinks and Rockfire Resources
Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the Rockfire Resources. But the stock apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 2.49 times less risky than Rockfire Resources. The stock trades about -0.06 of its potential returns per unit of risk. The Rockfire Resources plc is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 21.00 in Rockfire Resources plc on September 3, 2024 and sell it today you would lose (10.00) from holding Rockfire Resources plc or give up 47.62% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fevertree Drinks Plc vs. Rockfire Resources plc
Performance |
| Timeline |
| Fevertree Drinks Plc |
| Rockfire Resources plc |
Fevertree Drinks and Rockfire Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and Rockfire Resources
The main advantage of trading using opposite Fevertree Drinks and Rockfire Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, Rockfire Resources 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 Rockfire Resources will offset losses from the drop in Rockfire Resources' long position.| Fevertree Drinks vs. Air Products Chemicals | Fevertree Drinks vs. Sabien Technology Group | Fevertree Drinks vs. Alfa Financial Software | Fevertree Drinks vs. Albion Technology General |
| Rockfire Resources vs. LPKF Laser Electronics | Rockfire Resources vs. Fevertree Drinks Plc | Rockfire Resources vs. Spirent Communications plc | Rockfire Resources vs. Zegona Communications 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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