Correlation Between Anheuser Busch and Fevertree Drinks

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

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

Diversification Opportunities for Anheuser Busch and Fevertree Drinks

0.71

Correlation Coefficient

Anheuser Busch  Fevertree Drinks

Poor diversification

The 3 months correlation between Anheuser and Fevertree is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Anheuser Busch Inbev 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 Anheuser Busch 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 Anheuser Busch Inbev 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 Anheuser Busch i.e., Anheuser Busch and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Anheuser Busch and Fevertree Drinks

Considering the 90-day investment horizon Anheuser Busch is expected to generate 1.37 times less return on investment than Fevertree Drinks. But when comparing it to its historical volatility, Anheuser Busch Inbev is 2.46 times less risky than Fevertree Drinks. It trades about 0.23 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  830.00  in Fevertree Drinks Plc on December 30, 2024 and sell it today you would earn a total of  250.00  from holding Fevertree Drinks Plc or generate 30.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

Anheuser Busch Inbev  vs.  Fevertree Drinks Plc

Anheuser Busch Inbev

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Anheuser Busch exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fevertree Drinks Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Fevertree Drinks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Anheuser Busch and Fevertree Drinks

The main advantage of trading using opposite Anheuser Busch and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anheuser Busch 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 Anheuser Busch Inbev 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.