Correlation Between SATS and Fevertree Drinks

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

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

Diversification Opportunities for SATS and Fevertree Drinks

0.21

Correlation Coefficient

SATS  Fevertree Drinks

Modest diversification

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

Pair Corralation between SATS and Fevertree Drinks

Assuming the 90 days horizon SATS is expected to generate 1.78 times more return on investment than Fevertree Drinks. However, SATS is 1.78 times more volatile than Fevertree Drinks Plc. It trades about 0.15 of its potential returns per unit of risk. Fevertree Drinks Plc is currently generating about 0.05 per unit of risk. If you would invest  198.00  in SATS on May 20, 2025 and sell it today you would earn a total of  52.00  from holding SATS or generate 26.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	93.55%
Values	Daily Returns

SATS  vs.  Fevertree Drinks Plc

SATS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SATS are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, SATS reported solid returns over the last few months and may actually be approaching a breakup point.

Fevertree Drinks Plc

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Fevertree Drinks Plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Fevertree Drinks is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with SATS and Fevertree Drinks

The main advantage of trading using opposite SATS and Fevertree Drinks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SATS 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 SATS 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.