Correlation Between Fevertree Drinks and Park National

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

Diversification Opportunities for Fevertree Drinks and Park National

-0.36

Correlation Coefficient

Fevertree Drinks  Park National

Very good diversification

The 3 months correlation between Fevertree and Park is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Park National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Park National 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 Park National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Park National has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Park National go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Park National

Assuming the 90 days horizon Fevertree Drinks Plc is expected to under-perform the Park National. In addition to that, Fevertree Drinks is 1.24 times more volatile than Park National. It trades about -0.26 of its total potential returns per unit of risk. Park National is currently generating about -0.27 per unit of volatility. If you would invest  18,835  in Park National on October 11, 2024 and sell it today you would lose (1,763) from holding Park National or give up 9.36% of portfolio value over 90 days.

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

Fevertree Drinks Plc  vs.  Park National

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 February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Park National

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Park National are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Park National is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Fevertree Drinks and Park National

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

The idea behind Fevertree Drinks Plc and Park National 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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.