Correlation Between Fevertree Drinks and Turning Point

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

Diversification Opportunities for Fevertree Drinks and Turning Point

0.63

Correlation Coefficient

Fevertree Drinks  Turning Point

Poor diversification

The 3 months correlation between Fevertree and Turning is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Turning Point Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Turning Point Brands 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 Turning Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Turning Point Brands has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Turning Point go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Turning Point

Assuming the 90 days horizon Fevertree Drinks Plc is expected to under-perform the Turning Point. In addition to that, Fevertree Drinks is 1.76 times more volatile than Turning Point Brands. It trades about -0.01 of its total potential returns per unit of risk. Turning Point Brands is currently generating about 0.12 per unit of volatility. If you would invest  6,082  in Turning Point Brands on December 1, 2024 and sell it today you would earn a total of  948.00  from holding Turning Point Brands or generate 15.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	93.33%
Values	Daily Returns

Fevertree Drinks Plc  vs.  Turning Point Brands

Fevertree Drinks Plc

Risk-Adjusted Performance

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 nearly stable basic indicators, Fevertree Drinks is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Turning Point Brands

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Turning Point Brands are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Turning Point sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fevertree Drinks and Turning Point

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

The idea behind Fevertree Drinks Plc and Turning Point Brands 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.