Correlation Between Genfit and Fevertree Drinks

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

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

Diversification Opportunities for Genfit and Fevertree Drinks

0.75

Correlation Coefficient

Genfit  Fevertree Drinks

Poor diversification

The 3 months correlation between Genfit and Fevertree is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Genfit 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 Genfit 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 Genfit 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 Genfit i.e., Genfit and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Genfit and Fevertree Drinks

Given the investment horizon of 90 days Genfit is expected to under-perform the Fevertree Drinks. In addition to that, Genfit is 2.42 times more volatile than Fevertree Drinks Plc. It trades about -0.12 of its total potential returns per unit of risk. Fevertree Drinks Plc is currently generating about -0.22 per unit of volatility. If you would invest  1,028  in Fevertree Drinks Plc on September 24, 2024 and sell it today you would lose (201.00) from holding Fevertree Drinks Plc or give up 19.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.38%
Values	Daily Returns

Genfit  vs.  Fevertree Drinks Plc

Genfit

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genfit 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 technical and fundamental 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.

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 unfluctuating 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.

Pair Trading with Genfit and Fevertree Drinks

The main advantage of trading using opposite Genfit and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genfit 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 Genfit 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.