Correlation Between BBB Foods and Primo Brands
Can any of the company-specific risk be diversified away by investing in both BBB Foods and Primo 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 BBB Foods and Primo Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BBB Foods and Primo Brands, you can compare the effects of market volatilities on BBB Foods and Primo 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 BBB Foods with a short position of Primo Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of BBB Foods and Primo Brands.
Diversification Opportunities for BBB Foods and Primo Brands
-0.34 | Correlation Coefficient |
Very good diversification
The 3 months correlation between BBB and Primo is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding BBB Foods and Primo Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Brands and BBB Foods 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 BBB Foods are associated (or correlated) with Primo Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Brands has no effect on the direction of BBB Foods i.e., BBB Foods and Primo Brands go up and down completely randomly.
Pair Corralation between BBB Foods and Primo Brands
Given the investment horizon of 90 days BBB Foods is expected to generate 1.89 times more return on investment than Primo Brands. However, BBB Foods is 1.89 times more volatile than Primo Brands. It trades about 0.09 of its potential returns per unit of risk. Primo Brands is currently generating about 0.1 per unit of risk. If you would invest 1,750 in BBB Foods on September 20, 2024 and sell it today you would earn a total of 1,138 from holding BBB Foods or generate 65.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 44.04% |
| Values | Daily Returns |
BBB Foods vs. Primo Brands
Performance |
| Timeline |
| BBB Foods |
| Primo Brands |
BBB Foods and Primo Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BBB Foods and Primo Brands
The main advantage of trading using opposite BBB Foods and Primo Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BBB Foods position performs unexpectedly, Primo 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 Primo Brands will offset losses from the drop in Primo Brands' long position.| BBB Foods vs. Fomento Economico Mexicano | BBB Foods vs. PepsiCo | BBB Foods vs. United Microelectronics | BBB Foods vs. Eltek |
| Primo Brands vs. Tandy Leather Factory | Primo Brands vs. Uber Technologies | Primo Brands vs. Lipocine | Primo Brands vs. Valneva SE ADR |
Check out your portfolio center.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 Global Correlations module to find global opportunities by holding instruments from different markets.
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