Correlation Between Ming Le and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Ming Le and Fevertree Drinks 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 Ming Le and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ming Le Sports and Fevertree Drinks PLC, you can compare the effects of market volatilities on Ming Le and Fevertree Drinks 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 Ming Le with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ming Le and Fevertree Drinks.
Diversification Opportunities for Ming Le and Fevertree Drinks
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Ming and Fevertree is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Ming Le Sports and Fevertree Drinks PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks PLC and Ming Le 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 Ming Le Sports are associated (or correlated) with Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks PLC has no effect on the direction of Ming Le i.e., Ming Le and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Ming Le and Fevertree Drinks
Assuming the 90 days trading horizon Ming Le Sports is expected to generate 4.4 times more return on investment than Fevertree Drinks. However, Ming Le is 4.4 times more volatile than Fevertree Drinks PLC. It trades about 0.13 of its potential returns per unit of risk. Fevertree Drinks PLC is currently generating about 0.07 per unit of risk. If you would invest 100.00 in Ming Le Sports on September 13, 2024 and sell it today you would earn a total of 19.00 from holding Ming Le Sports or generate 19.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Ming Le Sports vs. Fevertree Drinks PLC
Performance |
| Timeline |
| Ming Le Sports |
| Fevertree Drinks PLC |
Ming Le and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ming Le and Fevertree Drinks
The main advantage of trading using opposite Ming Le and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ming Le position performs unexpectedly, Fevertree Drinks 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 Fevertree Drinks will offset losses from the drop in Fevertree Drinks' long position.The idea behind Ming Le Sports and Fevertree Drinks PLC pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Fevertree Drinks vs. Ming Le Sports | Fevertree Drinks vs. SPORT LISBOA E | Fevertree Drinks vs. MGIC INVESTMENT | Fevertree Drinks vs. Big 5 Sporting |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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