Correlation Between Primo Brands and Tamboran Resources

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

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

Diversification Opportunities for Primo Brands and Tamboran Resources

0.75

Correlation Coefficient

Primo Brands  Tamboran Resources

Poor diversification

The 3 months correlation between Primo and Tamboran is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands and Tamboran Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tamboran Resources 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 Tamboran Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tamboran Resources has no effect on the direction of Primo Brands i.e., Primo Brands and Tamboran Resources go up and down completely randomly.

Pair Corralation between Primo Brands and Tamboran Resources

Given the investment horizon of 90 days Primo Brands is expected to generate 7.32 times less return on investment than Tamboran Resources. But when comparing it to its historical volatility, Primo Brands is 2.75 times less risky than Tamboran Resources. It trades about 0.05 of its potential returns per unit of risk. Tamboran Resources is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,697  in Tamboran Resources on December 19, 2024 and sell it today you would earn a total of  689.00  from holding Tamboran Resources or generate 40.6% return on investment over 90 days.

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

Primo Brands  vs.  Tamboran Resources

Primo Brands

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong primary indicators, Primo Brands is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Tamboran Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tamboran Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental drivers, Tamboran Resources displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Primo Brands and Tamboran Resources

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

The idea behind Primo Brands and Tamboran Resources 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.