Correlation Between Sonida Senior and Fevertree Drinks

Can any of the company-specific risk be diversified away by investing in both Sonida Senior and Fevertree Drinks 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 Sonida Senior and Fevertree Drinks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sonida Senior Living and Fevertree Drinks Plc, you can compare the effects of market volatilities on Sonida Senior and Fevertree Drinks 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 Sonida Senior with a short position of Fevertree Drinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonida Senior and Fevertree Drinks.

Diversification Opportunities for Sonida Senior and Fevertree Drinks

0.41

Correlation Coefficient

Sonida Senior  Fevertree Drinks

Very weak diversification

The 3 months correlation between Sonida and Fevertree is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Sonida Senior Living and Fevertree Drinks Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fevertree Drinks Plc and Sonida Senior 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 Sonida Senior Living are associated (or correlated) with Fevertree Drinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fevertree Drinks Plc has no effect on the direction of Sonida Senior i.e., Sonida Senior and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Sonida Senior and Fevertree Drinks

Given the investment horizon of 90 days Sonida Senior is expected to generate 8.55 times less return on investment than Fevertree Drinks. But when comparing it to its historical volatility, Sonida Senior Living is 1.73 times less risky than Fevertree Drinks. It trades about 0.03 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  830.00  in Fevertree Drinks Plc on December 29, 2024 and sell it today you would earn a total of  250.00  from holding Fevertree Drinks Plc or generate 30.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.36%
Values	Daily Returns

Sonida Senior Living  vs.  Fevertree Drinks Plc

Sonida Senior Living

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonida Senior Living are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Sonida Senior is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Fevertree Drinks reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonida Senior and Fevertree Drinks

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

The idea behind Sonida Senior Living and Fevertree Drinks Plc 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.