Correlation Between Fevertree Drinks and Roper Technologies

Can any of the company-specific risk be diversified away by investing in both Fevertree Drinks and Roper Technologies 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 Roper Technologies 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 Roper Technologies, you can compare the effects of market volatilities on Fevertree Drinks and Roper Technologies 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 Roper Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fevertree Drinks and Roper Technologies.

Diversification Opportunities for Fevertree Drinks and Roper Technologies

-0.29

Correlation Coefficient

Fevertree Drinks  Roper Technologies

Very good diversification

The 3 months correlation between Fevertree and Roper is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Roper Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roper Technologies 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 Roper Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roper Technologies has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Roper Technologies go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Roper Technologies

Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the Roper Technologies. But the stock apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 2.51 times less risky than Roper Technologies. The stock trades about -0.02 of its potential returns per unit of risk. The Roper Technologies is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  42,687  in Roper Technologies on September 14, 2024 and sell it today you would earn a total of  11,692  from holding Roper Technologies or generate 27.39% return on investment over 90 days.

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

Fevertree Drinks Plc  vs.  Roper Technologies

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.

Roper Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roper Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Roper Technologies 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 Fevertree Drinks and Roper Technologies

The main advantage of trading using opposite Fevertree Drinks and Roper Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fevertree Drinks position performs unexpectedly, Roper Technologies 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 Roper Technologies will offset losses from the drop in Roper Technologies' long position.

The idea behind Fevertree Drinks Plc and Roper Technologies 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.