Correlation Between Vita Coco and Premium Brands

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

By analyzing existing cross correlation between Vita Coco and Premium Brands Holdings, you can compare the effects of market volatilities on Vita Coco and Premium Brands 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 Vita Coco with a short position of Premium Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vita Coco and Premium Brands.

Diversification Opportunities for Vita Coco and Premium Brands

-0.38

Correlation Coefficient

Vita Coco  Premium Brands

Very good diversification

The 3 months correlation between Vita and Premium is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Vita Coco and Premium Brands Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Premium Brands Holdings and Vita Coco 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 Vita Coco are associated (or correlated) with Premium Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Premium Brands Holdings has no effect on the direction of Vita Coco i.e., Vita Coco and Premium Brands go up and down completely randomly.

Pair Corralation between Vita Coco and Premium Brands

Given the investment horizon of 90 days Vita Coco is expected to under-perform the Premium Brands. In addition to that, Vita Coco is 2.03 times more volatile than Premium Brands Holdings. It trades about -0.09 of its total potential returns per unit of risk. Premium Brands Holdings is currently generating about 0.01 per unit of volatility. If you would invest  5,600  in Premium Brands Holdings on December 28, 2024 and sell it today you would lose (9.00) from holding Premium Brands Holdings or give up 0.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.16%
Values	Daily Returns

Vita Coco  vs.  Premium Brands Holdings

Vita Coco

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vita Coco has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Premium Brands Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Premium Brands Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Premium Brands is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Vita Coco and Premium Brands

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

The idea behind Vita Coco and Premium Brands Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.