Correlation Between Fevertree Drinks and Loar Holdings

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

Diversification Opportunities for Fevertree Drinks and Loar Holdings

-0.84

Correlation Coefficient

Fevertree Drinks  Loar Holdings

Pay attention - limited upside

The 3 months correlation between Fevertree and Loar is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and Loar Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Loar Holdings 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 Loar Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Loar Holdings has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and Loar Holdings go up and down completely randomly.

Pair Corralation between Fevertree Drinks and Loar Holdings

Assuming the 90 days horizon Fevertree Drinks Plc is expected to under-perform the Loar Holdings. But the pink sheet apears to be less risky and, when comparing its historical volatility, Fevertree Drinks Plc is 1.78 times less risky than Loar Holdings. The pink sheet trades about -0.21 of its potential returns per unit of risk. The Loar Holdings is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  6,762  in Loar Holdings on September 2, 2024 and sell it today you would earn a total of  2,446  from holding Loar Holdings or generate 36.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	96.88%
Values	Daily Returns

Fevertree Drinks Plc  vs.  Loar Holdings

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. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Loar Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Loar Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Loar Holdings reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fevertree Drinks and Loar Holdings

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

The idea behind Fevertree Drinks Plc and Loar Holdings 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.