Correlation Between United Utilities and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both United Utilities 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 United Utilities and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between United Utilities Group and Fevertree Drinks PLC, you can compare the effects of market volatilities on United Utilities 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 United Utilities with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of United Utilities and Fevertree Drinks.
Diversification Opportunities for United Utilities and Fevertree Drinks
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between United and Fevertree is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding United Utilities 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 United Utilities 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 United Utilities 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 United Utilities i.e., United Utilities and Fevertree Drinks go up and down completely randomly.
Pair Corralation between United Utilities and Fevertree Drinks
Assuming the 90 days trading horizon United Utilities Group is expected to under-perform the Fevertree Drinks. But the stock apears to be less risky and, when comparing its historical volatility, United Utilities Group is 1.87 times less risky than Fevertree Drinks. The stock trades about -0.31 of its potential returns per unit of risk. The Fevertree Drinks PLC is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 825.00 in Fevertree Drinks PLC on September 26, 2024 and sell it today you would lose (20.00) from holding Fevertree Drinks PLC or give up 2.42% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
United Utilities Group vs. Fevertree Drinks PLC
Performance |
| Timeline |
| United Utilities |
| Fevertree Drinks PLC |
United Utilities and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with United Utilities and Fevertree Drinks
The main advantage of trading using opposite United Utilities and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United Utilities 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.| United Utilities vs. American Water Works | United Utilities vs. Aqua America | United Utilities vs. Companhia de Saneamento | United Utilities vs. Guangdong Investment Limited |
| Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc | Fevertree Drinks vs. Apple Inc |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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