Correlation Between Fevertree Drinks and Monks Investment

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

Diversification Opportunities for Fevertree Drinks and Monks Investment

-0.77

Correlation Coefficient

Fevertree Drinks  Monks Investment

Pay attention - limited upside

The 3 months correlation between Fevertree and Monks is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Monks Investment Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monks Investment 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 Monks Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monks Investment Trust has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Monks Investment go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Monks Investment

Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the Monks Investment. In addition to that, Fevertree Drinks is 2.06 times more volatile than Monks Investment Trust. It trades about -0.06 of its total potential returns per unit of risk. Monks Investment Trust is currently generating about 0.25 per unit of volatility. If you would invest  113,600  in Monks Investment Trust on September 14, 2024 and sell it today you would earn a total of  15,800  from holding Monks Investment Trust or generate 13.91% return on investment over 90 days.

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

Fevertree Drinks Plc  vs.  Monks Investment Trust

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 comparatively stable basic indicators, Fevertree Drinks is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Monks Investment Trust

Risk-Adjusted Performance

19 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Monks Investment Trust are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Monks Investment unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fevertree Drinks and Monks Investment

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

The idea behind Fevertree Drinks Plc and Monks Investment 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.

Check out your portfolio center.

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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.