Correlation Between Fevertree Drinks and Kering SA
Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and Kering SA 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 Kering SA 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 Kering SA, you can compare the effects of market volatilities on Fevertree Drinks and Kering SA 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 Kering SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and Kering SA.
Diversification Opportunities for Fevertree Drinks and Kering SA
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Fevertree and Kering is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks PLC and Kering SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kering SA 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 Kering SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kering SA has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Kering SA go up and down completely randomly.
Pair Corralation between Fevertree Drinks and Kering SA
Assuming the 90 days trading horizon Fevertree Drinks is expected to generate 14.87 times less return on investment than Kering SA. But when comparing it to its historical volatility, Fevertree Drinks PLC is 1.36 times less risky than Kering SA. It trades about 0.02 of its potential returns per unit of risk. Kering SA is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 20,995 in Kering SA on September 14, 2024 and sell it today you would earn a total of 2,995 from holding Kering SA or generate 14.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fevertree Drinks PLC vs. Kering SA
Performance |
| Timeline |
| Fevertree Drinks PLC |
| Kering SA |
Fevertree Drinks and Kering SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fevertree Drinks and Kering SA
The main advantage of trading using opposite Fevertree Drinks and Kering SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, Kering SA 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 Kering SA will offset losses from the drop in Kering SA's long position.| Fevertree Drinks vs. Public Storage | Fevertree Drinks vs. GALENA MINING LTD | Fevertree Drinks vs. Pure Storage | Fevertree Drinks vs. Clean Energy Fuels |
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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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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