Correlation Between Gedeon Richter and Fevertree Drinks

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

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

Diversification Opportunities for Gedeon Richter and Fevertree Drinks

-0.11

Correlation Coefficient

Gedeon Richter  Fevertree Drinks

Good diversification

The 3 months correlation between Gedeon and Fevertree is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Gedeon Richter PLC 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 Gedeon Richter 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 Gedeon Richter PLC 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 Gedeon Richter i.e., Gedeon Richter and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Gedeon Richter and Fevertree Drinks

Assuming the 90 days trading horizon Gedeon Richter PLC is expected to generate 21.03 times more return on investment than Fevertree Drinks. However, Gedeon Richter is 21.03 times more volatile than Fevertree Drinks Plc. It trades about 0.1 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about 0.05 per unit of risk. If you would invest  504,000  in Gedeon Richter PLC on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Gedeon Richter PLC or generate 0.0% return on investment over 90 days.

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

Gedeon Richter PLC  vs.  Fevertree Drinks Plc

Gedeon Richter PLC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gedeon Richter PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Gedeon Richter 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

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 comparatively stable basic indicators, Fevertree Drinks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Gedeon Richter and Fevertree Drinks

The main advantage of trading using opposite Gedeon Richter and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gedeon Richter 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 Gedeon Richter PLC 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.