Correlation Between ASPEN TECHINC and Fevertree Drinks
Can any of the company-specific risk be diversified away by investing in both ASPEN TECHINC 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 ASPEN TECHINC and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ASPEN TECHINC DL and Fevertree Drinks PLC, you can compare the effects of market volatilities on ASPEN TECHINC 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 ASPEN TECHINC with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of ASPEN TECHINC and Fevertree Drinks.
Diversification Opportunities for ASPEN TECHINC and Fevertree Drinks
-0.84 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between ASPEN and Fevertree is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding ASPEN TECHINC DL 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 ASPEN TECHINC 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 ASPEN TECHINC DL 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 ASPEN TECHINC i.e., ASPEN TECHINC and Fevertree Drinks go up and down completely randomly.
Pair Corralation between ASPEN TECHINC and Fevertree Drinks
Assuming the 90 days horizon ASPEN TECHINC DL is expected to generate 0.9 times more return on investment than Fevertree Drinks. However, ASPEN TECHINC DL is 1.11 times less risky than Fevertree Drinks. It trades about 0.18 of its potential returns per unit of risk. Fevertree Drinks PLC is currently generating about -0.15 per unit of risk. If you would invest 21,800 in ASPEN TECHINC DL on August 30, 2024 and sell it today you would earn a total of 1,800 from holding ASPEN TECHINC DL or generate 8.26% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ASPEN TECHINC DL vs. Fevertree Drinks PLC
Performance |
| Timeline |
| ASPEN TECHINC DL |
| Fevertree Drinks PLC |
ASPEN TECHINC and Fevertree Drinks Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ASPEN TECHINC and Fevertree Drinks
The main advantage of trading using opposite ASPEN TECHINC and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ASPEN TECHINC 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 ASPEN TECHINC DL 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. 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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