Correlation Between Fevertree Drinks and Aegon Funding

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

Diversification Opportunities for Fevertree Drinks and Aegon Funding

0.69

Correlation Coefficient

Fevertree Drinks  Aegon Funding

Poor diversification

The 3 months correlation between Fevertree and Aegon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Aegon Funding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aegon Funding 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 Aegon Funding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aegon Funding has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Aegon Funding go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Aegon Funding

Assuming the 90 days horizon Fevertree Drinks Plc is expected to under-perform the Aegon Funding. In addition to that, Fevertree Drinks is 2.08 times more volatile than Aegon Funding. It trades about -0.21 of its total potential returns per unit of risk. Aegon Funding is currently generating about 0.01 per unit of volatility. If you would invest  2,175  in Aegon Funding on September 3, 2024 and sell it today you would earn a total of  4.00  from holding Aegon Funding or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Fevertree Drinks Plc  vs.  Aegon Funding

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. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Aegon Funding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aegon Funding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Aegon Funding is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Fevertree Drinks and Aegon Funding

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

The idea behind Fevertree Drinks Plc and Aegon Funding 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.