Correlation Between SoftBank Group and Fevertree Drinks

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

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

Diversification Opportunities for SoftBank Group and Fevertree Drinks

-0.65

Correlation Coefficient

SoftBank Group  Fevertree Drinks

Excellent diversification

The 3 months correlation between SoftBank and Fevertree is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding SoftBank Group Corp 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 SoftBank Group 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 SoftBank Group Corp 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 SoftBank Group i.e., SoftBank Group and Fevertree Drinks go up and down completely randomly.

Pair Corralation between SoftBank Group and Fevertree Drinks

Assuming the 90 days trading horizon SoftBank Group Corp is expected to generate 1.54 times more return on investment than Fevertree Drinks. However, SoftBank Group is 1.54 times more volatile than Fevertree Drinks Plc. It trades about 0.35 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.1 per unit of risk. If you would invest  918,500  in SoftBank Group Corp on October 27, 2024 and sell it today you would earn a total of  137,500  from holding SoftBank Group Corp or generate 14.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	65.0%
Values	Daily Returns

SoftBank Group Corp  vs.  Fevertree Drinks Plc

SoftBank Group Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SoftBank Group Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, SoftBank Group 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 unsteady 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 SoftBank Group and Fevertree Drinks

The main advantage of trading using opposite SoftBank Group and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SoftBank Group 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 SoftBank Group Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.