Correlation Between Primo Brands and SNDL

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

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

Diversification Opportunities for Primo Brands and SNDL

-0.64

Correlation Coefficient

Primo Brands  SNDL

Excellent diversification

The 3 months correlation between Primo and SNDL is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands and SNDL Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SNDL Inc and Primo Brands 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 Primo Brands are associated (or correlated) with SNDL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SNDL Inc has no effect on the direction of Primo Brands i.e., Primo Brands and SNDL go up and down completely randomly.

Pair Corralation between Primo Brands and SNDL

Given the investment horizon of 90 days Primo Brands is expected to generate 0.4 times more return on investment than SNDL. However, Primo Brands is 2.52 times less risky than SNDL. It trades about 0.1 of its potential returns per unit of risk. SNDL Inc is currently generating about 0.01 per unit of risk. If you would invest  1,444  in Primo Brands on September 23, 2024 and sell it today you would earn a total of  1,654  from holding Primo Brands or generate 114.54% return on investment over 90 days.

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

Primo Brands  vs.  SNDL Inc

Primo Brands

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

SNDL Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SNDL Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Primo Brands and SNDL

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

The idea behind Primo Brands and SNDL Inc 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.