Correlation Between Fevertree Drinks and BP PLC

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

Diversification Opportunities for Fevertree Drinks and BP PLC

0.1

Correlation Coefficient

Fevertree Drinks  BP PLC

Average diversification

The 3 months correlation between Fevertree and BP PLC is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Fevertree Drinks Plc and BP PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP PLC 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 BP PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP PLC has no effect on the direction of Fevertree Drinks i.e., Fevertree Drinks and BP PLC go up and down completely randomly.

Pair Corralation between Fevertree Drinks and BP PLC

Assuming the 90 days trading horizon Fevertree Drinks Plc is expected to under-perform the BP PLC. In addition to that, Fevertree Drinks is 1.52 times more volatile than BP PLC. It trades about -0.01 of its total potential returns per unit of risk. BP PLC is currently generating about -0.01 per unit of volatility. If you would invest  40,844  in BP PLC on March 30, 2025 and sell it today you would lose (3,804) from holding BP PLC or give up 9.31% of portfolio value over 90 days.

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

Fevertree Drinks Plc  vs.  BP PLC

Fevertree Drinks Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Fevertree Drinks unveiled solid returns over the last few months and may actually be approaching a breakup point.

BP PLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days BP PLC 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 basic indicators remain rather sound which may send shares a bit higher in July 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Fevertree Drinks and BP PLC

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

The idea behind Fevertree Drinks Plc and BP 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.