Correlation Between Fevertree Drinks and Newtek Business

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

Diversification Opportunities for Fevertree Drinks and Newtek Business

-0.63

Correlation Coefficient

Fevertree Drinks  Newtek Business

Excellent diversification

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

Pair Corralation between Fevertree Drinks and Newtek Business

Assuming the 90 days trading horizon Fevertree Drinks PLC is expected to under-perform the Newtek Business. But the stock apears to be less risky and, when comparing its historical volatility, Fevertree Drinks PLC is 1.19 times less risky than Newtek Business. The stock trades about -0.4 of its potential returns per unit of risk. The Newtek Business Services is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  1,298  in Newtek Business Services on October 10, 2024 and sell it today you would lose (70.00) from holding Newtek Business Services or give up 5.39% of portfolio value over 90 days.

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

Fevertree Drinks PLC  vs.  Newtek Business Services

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. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Newtek Business Services

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Newtek Business reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fevertree Drinks and Newtek Business

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

The idea behind Fevertree Drinks PLC and Newtek Business 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.