Correlation Between Fevertree Drinks and United Utilities
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and United Utilities 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 United Utilities 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 United Utilities Group, you can compare the effects of market volatilities on Fevertree Drinks and United Utilities 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 United Utilities. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and United Utilities.
Diversification Opportunities for Fevertree Drinks and United Utilities
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Fevertree and United is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and United Utilities Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Utilities 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 United Utilities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Utilities has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and United Utilities go up and down completely randomly.
Pair Corralation between Fevertree Drinks and United Utilities
Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the United Utilities. In addition to that, Fevertree Drinks is 1.6 times more volatile than United Utilities Group. It trades about -0.06 of its total potential returns per unit of risk. United Utilities Group is currently generating about 0.03 per unit of volatility. If you would invest 93,169 in United Utilities Group on November 7, 2024 and sell it today you would earn a total of 7,181 from holding United Utilities Group or generate 7.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fevertree Drinks Plc vs. United Utilities Group
Performance |
| Timeline |
| Fevertree Drinks Plc |
| United Utilities |
Fevertree Drinks and United Utilities Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and United Utilities
The main advantage of trading using opposite Fevertree Drinks and United Utilities positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, United Utilities 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 United Utilities will offset losses from the drop in United Utilities' long position.| Fevertree Drinks vs. Fidelity National Information | Fevertree Drinks vs. Electronic Arts | Fevertree Drinks vs. Alliance Data Systems | Fevertree Drinks vs. Nordic Semiconductor ASA |
| United Utilities vs. Waste Management | United Utilities vs. Coor Service Management | United Utilities vs. Rosslyn Data Technologies | United Utilities vs. PureTech Health 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.
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