Correlation Between Fevertree Drinks and Lockheed Martin

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

Diversification Opportunities for Fevertree Drinks and Lockheed Martin

0.72

Correlation Coefficient

Fevertree Drinks  Lockheed Martin

Poor diversification

The 3 months correlation between Fevertree and Lockheed is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks PLC and Lockheed Martin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lockheed Martin 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 Lockheed Martin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lockheed Martin has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Lockheed Martin go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Lockheed Martin

Assuming the 90 days trading horizon Fevertree Drinks PLC is expected to under-perform the Lockheed Martin. In addition to that, Fevertree Drinks is 1.09 times more volatile than Lockheed Martin. It trades about -0.46 of its total potential returns per unit of risk. Lockheed Martin is currently generating about -0.33 per unit of volatility. If you would invest  48,330  in Lockheed Martin on October 9, 2024 and sell it today you would lose (3,345) from holding Lockheed Martin or give up 6.92% of portfolio value over 90 days.

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

Fevertree Drinks PLC  vs.  Lockheed Martin

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 uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Lockheed Martin

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lockheed Martin has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with Fevertree Drinks and Lockheed Martin

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

The idea behind Fevertree Drinks PLC and Lockheed Martin 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.