Correlation Between Fevertree Drinks and COCA COLA

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

Diversification Opportunities for Fevertree Drinks and COCA COLA

0.56

Correlation Coefficient

Fevertree Drinks  COCA COLA

Very weak diversification

The 3 months correlation between Fevertree and COCA is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks PLC and COCA A HBC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on COCA A HBC 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 COCA COLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of COCA A HBC has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and COCA COLA go up and down completely randomly.

Pair Corralation between Fevertree Drinks and COCA COLA

Assuming the 90 days trading horizon Fevertree Drinks is expected to generate 1.94 times less return on investment than COCA COLA. In addition to that, Fevertree Drinks is 2.26 times more volatile than COCA A HBC. It trades about 0.05 of its total potential returns per unit of risk. COCA A HBC is currently generating about 0.24 per unit of volatility. If you would invest  3,260  in COCA A HBC on December 25, 2024 and sell it today you would earn a total of  820.00  from holding COCA A HBC or generate 25.15% 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.  COCA A HBC

Fevertree Drinks PLC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fevertree Drinks may actually be approaching a critical reversion point that can send shares even higher in April 2025.

COCA A HBC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in COCA A HBC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile forward-looking signals, COCA COLA reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fevertree Drinks and COCA COLA

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

The idea behind Fevertree Drinks PLC and COCA A HBC 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.