Correlation Between Fevertree Drinks and Fulcrum Metals

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

Diversification Opportunities for Fevertree Drinks and Fulcrum Metals

0.82

Correlation Coefficient

Fevertree Drinks  Fulcrum Metals

Very poor diversification

The 3 months correlation between Fevertree and Fulcrum is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Fulcrum Metals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulcrum Metals PLC 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 Fulcrum Metals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulcrum Metals PLC has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Fulcrum Metals go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Fulcrum Metals

Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to generate 0.71 times more return on investment than Fulcrum Metals. However, Fevertree Drinks Plc is 1.42 times less risky than Fulcrum Metals. It trades about -0.14 of its potential returns per unit of risk. Fulcrum Metals PLC is currently generating about -0.15 per unit of risk. If you would invest  78,963  in Fevertree Drinks Plc on September 19, 2024 and sell it today you would lose (10,813) from holding Fevertree Drinks Plc or give up 13.69% of portfolio value over 90 days.

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

Fevertree Drinks Plc  vs.  Fulcrum Metals PLC

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

Fulcrum Metals PLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fulcrum Metals 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 January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Fevertree Drinks and Fulcrum Metals

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

The idea behind Fevertree Drinks Plc and Fulcrum Metals 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.