Correlation Between Fevertree Drinks and Mitie Group

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

Diversification Opportunities for Fevertree Drinks and Mitie Group

0.74

Correlation Coefficient

Fevertree Drinks  Mitie Group

Poor diversification

The 3 months correlation between Fevertree and Mitie is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Mitie Group PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mitie Group PLC 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 Mitie Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mitie Group PLC has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Mitie Group go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Mitie Group

Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to generate 0.91 times more return on investment than Mitie Group. However, Fevertree Drinks Plc is 1.1 times less risky than Mitie Group. It trades about -0.05 of its potential returns per unit of risk. Mitie Group PLC is currently generating about -0.06 per unit of risk. If you would invest  76,084  in Fevertree Drinks Plc on September 13, 2024 and sell it today you would lose (4,584) from holding Fevertree Drinks Plc or give up 6.02% of portfolio value over 90 days.

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

Fevertree Drinks Plc  vs.  Mitie Group PLC

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 latest stock price uproar, may contribute to short-horizon losses for the private investors.

Mitie Group PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mitie Group PLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Fevertree Drinks and Mitie Group

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

The idea behind Fevertree Drinks Plc and Mitie Group 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.