Correlation Between Heavitree Brewery and Fevertree Drinks

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

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

Diversification Opportunities for Heavitree Brewery and Fevertree Drinks

0.21

Correlation Coefficient

Heavitree Brewery  Fevertree Drinks

Modest diversification

The 3 months correlation between Heavitree and Fevertree is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Heavitree Brewery 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 Heavitree Brewery 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 Heavitree Brewery 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 Heavitree Brewery i.e., Heavitree Brewery and Fevertree Drinks go up and down completely randomly.

Pair Corralation between Heavitree Brewery and Fevertree Drinks

Assuming the 90 days trading horizon Heavitree Brewery is expected to generate 13.22 times less return on investment than Fevertree Drinks. But when comparing it to its historical volatility, Heavitree Brewery is 10.03 times less risky than Fevertree Drinks. It trades about 0.13 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  77,673  in Fevertree Drinks Plc on April 23, 2025 and sell it today you would earn a total of  13,727  from holding Fevertree Drinks Plc or generate 17.67% return on investment over 90 days.

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

Heavitree Brewery  vs.  Fevertree Drinks Plc

Heavitree Brewery

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Heavitree Brewery are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Heavitree Brewery is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 Heavitree Brewery and Fevertree Drinks

The main advantage of trading using opposite Heavitree Brewery and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heavitree Brewery 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 Heavitree Brewery 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.