Correlation Between Spire Healthcare and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both Spire Healthcare 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 Spire Healthcare and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spire Healthcare Group and Fevertree Drinks Plc, you can compare the effects of market volatilities on Spire Healthcare 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 Spire Healthcare with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spire Healthcare and Fevertree Drinks.
Diversification Opportunities for Spire Healthcare and Fevertree Drinks
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Spire and Fevertree is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Spire Healthcare Group 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 Spire Healthcare 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 Spire Healthcare Group 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 Spire Healthcare i.e., Spire Healthcare and Fevertree Drinks go up and down completely randomly.
Pair Corralation between Spire Healthcare and Fevertree Drinks
Assuming the 90 days trading horizon Spire Healthcare Group is expected to generate 0.6 times more return on investment than Fevertree Drinks. However, Spire Healthcare Group is 1.68 times less risky than Fevertree Drinks. It trades about -0.04 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.12 per unit of risk. If you would invest 23,800 in Spire Healthcare Group on September 13, 2024 and sell it today you would lose (1,500) from holding Spire Healthcare Group or give up 6.3% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spire Healthcare Group vs. Fevertree Drinks Plc
Performance |
| Timeline |
| Spire Healthcare |
| Fevertree Drinks Plc |
Spire Healthcare and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spire Healthcare and Fevertree Drinks
The main advantage of trading using opposite Spire Healthcare and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spire Healthcare 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.| Spire Healthcare vs. Smithson Investment Trust | Spire Healthcare vs. Microchip Technology | Spire Healthcare vs. Ocean Harvest Technology | Spire Healthcare vs. Schroders Investment Trusts |
| Fevertree Drinks vs. Rightmove PLC | Fevertree Drinks vs. Bioventix | Fevertree Drinks vs. VeriSign | Fevertree Drinks vs. Games Workshop Group |
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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