Correlation Between Volkswagen and Fevertree Drinks

Can any of the company-specific risk be diversified away by investing in both Volkswagen 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 Volkswagen and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Volkswagen AG Non Vtg and Fevertree Drinks Plc, you can compare the effects of market volatilities on Volkswagen 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 Volkswagen with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Volkswagen and Fevertree Drinks.

Diversification Opportunities for Volkswagen and Fevertree Drinks

0.64

Correlation Coefficient

Volkswagen  Fevertree Drinks

Poor diversification

The 3 months correlation between Volkswagen and Fevertree is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Volkswagen AG Non Vtg 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 Volkswagen 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 Volkswagen AG Non Vtg 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 Volkswagen i.e., Volkswagen and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Volkswagen and Fevertree Drinks

Assuming the 90 days trading horizon Volkswagen AG Non Vtg is expected to generate 0.74 times more return on investment than Fevertree Drinks. However, Volkswagen AG Non Vtg is 1.34 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 -0.06 per unit of risk. If you would invest  10,504  in Volkswagen AG Non Vtg on October 6, 2024 and sell it today you would lose (1,833) from holding Volkswagen AG Non Vtg or give up 17.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Volkswagen AG Non Vtg  vs.  Fevertree Drinks Plc

Volkswagen AG Non

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Volkswagen AG Non Vtg has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Fevertree Drinks Plc

Risk-Adjusted Performance

0 of 100

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Volkswagen and Fevertree Drinks

The main advantage of trading using opposite Volkswagen and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Volkswagen 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 Volkswagen AG Non Vtg 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.