Correlation Between Fevertree Drinks and DOLLAR

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

Diversification Opportunities for Fevertree Drinks and DOLLAR

0.46

Correlation Coefficient

Fevertree Drinks  DOLLAR

Very weak diversification

The 3 months correlation between Fevertree and DOLLAR is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and DOLLAR TREE INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DOLLAR TREE INC 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 DOLLAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DOLLAR TREE INC has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and DOLLAR go up and down completely randomly.

Pair Corralation between Fevertree Drinks and DOLLAR

Assuming the 90 days horizon Fevertree Drinks Plc is expected to under-perform the DOLLAR. In addition to that, Fevertree Drinks is 9.66 times more volatile than DOLLAR TREE INC. It trades about -0.19 of its total potential returns per unit of risk. DOLLAR TREE INC is currently generating about 0.04 per unit of volatility. If you would invest  9,947  in DOLLAR TREE INC on October 10, 2024 and sell it today you would earn a total of  39.00  from holding DOLLAR TREE INC or generate 0.39% return on investment over 90 days.

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

Fevertree Drinks Plc  vs.  DOLLAR TREE INC

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.

DOLLAR TREE INC

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DOLLAR TREE INC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, DOLLAR is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fevertree Drinks and DOLLAR

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

The idea behind Fevertree Drinks Plc and DOLLAR TREE INC 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 CEOs Directory module to screen CEOs from public companies around the world.