Correlation Between Fevertree Drinks and Lincoln Educational

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

Diversification Opportunities for Fevertree Drinks and Lincoln Educational

0.14

Correlation Coefficient

Fevertree Drinks  Lincoln Educational

Average diversification

The 3 months correlation between Fevertree and Lincoln is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Lincoln Educational Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lincoln Educational 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 Lincoln Educational. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lincoln Educational has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Lincoln Educational go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Lincoln Educational

Assuming the 90 days horizon Fevertree Drinks Plc is expected to generate 1.15 times more return on investment than Lincoln Educational. However, Fevertree Drinks is 1.15 times more volatile than Lincoln Educational Services. It trades about 0.13 of its potential returns per unit of risk. Lincoln Educational Services is currently generating about 0.01 per unit of risk. 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	Insignificant
Accuracy	98.39%
Values	Daily Returns

Fevertree Drinks Plc  vs.  Lincoln Educational Services

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.

Lincoln Educational

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lincoln Educational Services are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Lincoln Educational 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 Lincoln Educational

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

The idea behind Fevertree Drinks Plc and Lincoln Educational Services 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.