Correlation Between Fevertree Drinks and HCA Healthcare

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

Diversification Opportunities for Fevertree Drinks and HCA Healthcare

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Fevertree and HCA is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and HCA Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCA Healthcare and Fevertree Drinks 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 Fevertree Drinks Plc are associated (or correlated) with HCA Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCA Healthcare has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and HCA Healthcare go up and down completely randomly.

Pair Corralation between Fevertree Drinks and HCA Healthcare

Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the HCA Healthcare. But the stock apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 3.89 times less risky than HCA Healthcare. The stock trades about -0.04 of its potential returns per unit of risk. The HCA Healthcare is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  25,339  in HCA Healthcare on October 25, 2024 and sell it today you would earn a total of  6,613  from holding HCA Healthcare or generate 26.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.6%
ValuesDaily Returns

Fevertree Drinks Plc  vs.  HCA Healthcare

 Performance 
       Timeline  
Fevertree Drinks Plc 

Risk-Adjusted Performance

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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 latest unsteady 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.
HCA Healthcare 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days HCA Healthcare 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 and HCA Healthcare Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fevertree Drinks and HCA Healthcare

The main advantage of trading using opposite Fevertree Drinks and HCA Healthcare positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, HCA Healthcare 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 HCA Healthcare will offset losses from the drop in HCA Healthcare's long position.
The idea behind Fevertree Drinks Plc and HCA Healthcare 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.

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