Correlation Between Fevertree Drinks and Waste Management

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

Diversification Opportunities for Fevertree Drinks and Waste Management

-0.37

Correlation Coefficient

Fevertree Drinks  Waste Management

Very good diversification

The 3 months correlation between Fevertree and Waste is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Waste Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Waste Management 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 Waste Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Waste Management has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Waste Management go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Waste Management

Assuming the 90 days horizon Fevertree Drinks Plc is expected to under-perform the Waste Management. In addition to that, Fevertree Drinks is 1.51 times more volatile than Waste Management. It trades about -0.19 of its total potential returns per unit of risk. Waste Management is currently generating about 0.0 per unit of volatility. If you would invest  20,849  in Waste Management on September 28, 2024 and sell it today you would lose (347.00) from holding Waste Management or give up 1.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.63%
Values	Daily Returns

Fevertree Drinks Plc  vs.  Waste Management

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 unfluctuating 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.

Waste Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Waste Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Waste Management is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fevertree Drinks and Waste Management

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

The idea behind Fevertree Drinks Plc and Waste Management 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.