Correlation Between Sligro Food and Fevertree Drinks

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

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

Diversification Opportunities for Sligro Food and Fevertree Drinks

0.62

Correlation Coefficient

Sligro Food  Fevertree Drinks

Poor diversification

The 3 months correlation between Sligro and Fevertree is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sligro Food Group 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 Sligro Food 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 Sligro Food Group 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 Sligro Food i.e., Sligro Food and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Sligro Food and Fevertree Drinks

Assuming the 90 days horizon Sligro Food Group is expected to under-perform the Fevertree Drinks. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sligro Food Group is 2.23 times less risky than Fevertree Drinks. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Fevertree Drinks Plc is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  1,178  in Fevertree Drinks Plc on September 14, 2024 and sell it today you would lose (288.00) from holding Fevertree Drinks Plc or give up 24.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	89.82%
Values	Daily Returns

Sligro Food Group  vs.  Fevertree Drinks Plc

Sligro Food Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sligro Food Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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.

Pair Trading with Sligro Food and Fevertree Drinks

The main advantage of trading using opposite Sligro Food and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sligro Food 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 Sligro Food Group 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 CEOs Directory module to screen CEOs from public companies around the world.