Correlation Between Primo Brands and Zeo Energy

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

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

Diversification Opportunities for Primo Brands and Zeo Energy

0.6

Correlation Coefficient

Primo Brands  Zeo Energy

Poor diversification

The 3 months correlation between Primo and Zeo is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands and Zeo Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zeo Energy Corp 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 Zeo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zeo Energy Corp has no effect on the direction of Primo Brands i.e., Primo Brands and Zeo Energy go up and down completely randomly.

Pair Corralation between Primo Brands and Zeo Energy

Given the investment horizon of 90 days Primo Brands is expected to generate 22.56 times less return on investment than Zeo Energy. But when comparing it to its historical volatility, Primo Brands is 10.73 times less risky than Zeo Energy. It trades about 0.03 of its potential returns per unit of risk. Zeo Energy Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  265.00  in Zeo Energy Corp on October 9, 2024 and sell it today you would lose (6.00) from holding Zeo Energy Corp or give up 2.26% of portfolio value over 90 days.

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

Primo Brands  vs.  Zeo Energy Corp

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 weak primary indicators, Primo Brands sustained solid returns over the last few months and may actually be approaching a breakup point.

Zeo Energy Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Zeo Energy Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Zeo Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Primo Brands and Zeo Energy

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

The idea behind Primo Brands and Zeo Energy Corp 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.