Correlation Between Enbridge and Fevertree Drinks

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Can any of the company-specific risk be diversified away by investing in both Enbridge 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 Enbridge and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Fevertree Drinks Plc, you can compare the effects of market volatilities on Enbridge 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 Enbridge with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Fevertree Drinks.

Diversification Opportunities for Enbridge and Fevertree Drinks

-0.9
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Enbridge and Fevertree is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge 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 Enbridge 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 Enbridge 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 Enbridge i.e., Enbridge and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Enbridge and Fevertree Drinks

Assuming the 90 days trading horizon Enbridge is expected to generate 0.43 times more return on investment than Fevertree Drinks. However, Enbridge is 2.3 times less risky than Fevertree Drinks. It trades about 0.3 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.14 per unit of risk. If you would invest  5,300  in Enbridge on August 31, 2024 and sell it today you would earn a total of  700.00  from holding Enbridge or generate 13.21% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy65.63%
ValuesDaily Returns

Enbridge  vs.  Fevertree Drinks Plc

 Performance 
       Timeline  
Enbridge 

Risk-Adjusted Performance

23 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Enbridge are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Enbridge unveiled solid returns over the last few months and may actually be approaching a breakup point.
Fevertree Drinks Plc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Fevertree Drinks Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Enbridge and Fevertree Drinks Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Enbridge and Fevertree Drinks

The main advantage of trading using opposite Enbridge and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge 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 Enbridge 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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