Correlation Between Fevertree Drinks and Chongqing Machinery
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and Chongqing Machinery 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 Chongqing Machinery 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 Chongqing Machinery Electric, you can compare the effects of market volatilities on Fevertree Drinks and Chongqing Machinery 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 Chongqing Machinery. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and Chongqing Machinery.
Diversification Opportunities for Fevertree Drinks and Chongqing Machinery
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Fevertree and Chongqing is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks PLC and Chongqing Machinery Electric in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Machinery 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 Chongqing Machinery. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Machinery has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Chongqing Machinery go up and down completely randomly.
Pair Corralation between Fevertree Drinks and Chongqing Machinery
Assuming the 90 days trading horizon Fevertree Drinks PLC is expected to under-perform the Chongqing Machinery. In addition to that, Fevertree Drinks is 1.01 times more volatile than Chongqing Machinery Electric. It trades about -0.13 of its total potential returns per unit of risk. Chongqing Machinery Electric is currently generating about 0.04 per unit of volatility. If you would invest 7.35 in Chongqing Machinery Electric on August 29, 2024 and sell it today you would earn a total of 0.10 from holding Chongqing Machinery Electric or generate 1.36% 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. Chongqing Machinery Electric
Performance |
| Timeline |
| Fevertree Drinks PLC |
| Chongqing Machinery |
Fevertree Drinks and Chongqing Machinery Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and Chongqing Machinery
The main advantage of trading using opposite Fevertree Drinks and Chongqing Machinery positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, Chongqing Machinery 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 Chongqing Machinery will offset losses from the drop in Chongqing Machinery's long position.| Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc |
| Chongqing Machinery vs. Park Hotels Resorts | Chongqing Machinery vs. Materialise NV | Chongqing Machinery vs. InterContinental Hotels Group | Chongqing Machinery vs. Summit Hotel Properties |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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