Correlation Between Primo Brands and PEPSICO

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

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

Diversification Opportunities for Primo Brands and PEPSICO

-0.49

Correlation Coefficient

Primo Brands  PEPSICO

Very good diversification

The 3 months correlation between Primo and PEPSICO is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands and PEPSICO INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PEPSICO 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 PEPSICO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PEPSICO INC has no effect on the direction of Primo Brands i.e., Primo Brands and PEPSICO go up and down completely randomly.

Pair Corralation between Primo Brands and PEPSICO

Given the investment horizon of 90 days Primo Brands is expected to generate 4.6 times more return on investment than PEPSICO. However, Primo Brands is 4.6 times more volatile than PEPSICO INC. It trades about 0.2 of its potential returns per unit of risk. PEPSICO INC is currently generating about -0.05 per unit of risk. If you would invest  2,438  in Primo Brands on September 29, 2024 and sell it today you would earn a total of  677.00  from holding Primo Brands or generate 27.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Primo Brands  vs.  PEPSICO INC

Primo Brands

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Brands are ranked lower than 15 (%) 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.

PEPSICO INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PEPSICO INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, PEPSICO is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Primo Brands and PEPSICO

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

The idea behind Primo Brands and PEPSICO 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.