Correlation Between Fevertree Drinks and Medical Properties

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

Diversification Opportunities for Fevertree Drinks and Medical Properties

0.68

Correlation Coefficient

Fevertree Drinks  Medical Properties

Poor diversification

The 3 months correlation between Fevertree and Medical is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks PLC and Medical Properties Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medical Properties Trust 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 Medical Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medical Properties Trust has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Medical Properties go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Medical Properties

Assuming the 90 days trading horizon Fevertree Drinks is expected to generate 1.58 times less return on investment than Medical Properties. In addition to that, Fevertree Drinks is 1.09 times more volatile than Medical Properties Trust. It trades about 0.11 of its total potential returns per unit of risk. Medical Properties Trust is currently generating about 0.19 per unit of volatility. If you would invest  387.00  in Medical Properties Trust on December 31, 2024 and sell it today you would earn a total of  180.00  from holding Medical Properties Trust or generate 46.51% return on investment over 90 days.

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

Fevertree Drinks PLC  vs.  Medical Properties Trust

Fevertree Drinks PLC

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks PLC are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Fevertree Drinks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Medical Properties Trust

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Medical Properties Trust are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Medical Properties reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fevertree Drinks and Medical Properties

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

The idea behind Fevertree Drinks PLC and Medical Properties Trust 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.