Correlation Between Cairn Homes and Fevertree Drinks

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

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

Diversification Opportunities for Cairn Homes and Fevertree Drinks

0.86

Correlation Coefficient

Cairn Homes  Fevertree Drinks

Very poor diversification

The 3 months correlation between Cairn and Fevertree is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Cairn Homes PLC 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 Cairn Homes 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 Cairn Homes PLC 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 Cairn Homes i.e., Cairn Homes and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Cairn Homes and Fevertree Drinks

Assuming the 90 days trading horizon Cairn Homes PLC is expected to generate 1.26 times more return on investment than Fevertree Drinks. However, Cairn Homes is 1.26 times more volatile than Fevertree Drinks Plc. It trades about 0.14 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about 0.17 per unit of risk. If you would invest  15,868  in Cairn Homes PLC on April 23, 2025 and sell it today you would earn a total of  2,792  from holding Cairn Homes PLC or generate 17.6% return on investment over 90 days.

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

Cairn Homes PLC  vs.  Fevertree Drinks Plc

Cairn Homes PLC

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cairn Homes PLC are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Cairn Homes exhibited solid returns over the last few months and may actually be approaching a breakup point.

Fevertree Drinks Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks Plc are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Fevertree Drinks unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cairn Homes and Fevertree Drinks

The main advantage of trading using opposite Cairn Homes and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cairn Homes 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 Cairn Homes PLC 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..