Correlation Between Primo Water and IShares SPTSX

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

By analyzing existing cross correlation between Primo Water Corp and iShares SPTSX Capped, you can compare the effects of market volatilities on Primo Water and IShares SPTSX 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 Water with a short position of IShares SPTSX. Check out your portfolio center. Please also check ongoing floating volatility patterns of Primo Water and IShares SPTSX.

Diversification Opportunities for Primo Water and IShares SPTSX

-0.74

Correlation Coefficient

Primo Water  IShares SPTSX

Pay attention - limited upside

The 3 months correlation between Primo and IShares is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Primo Water Corp and iShares SPTSX Capped in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares SPTSX Capped and Primo Water 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 Water Corp are associated (or correlated) with IShares SPTSX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares SPTSX Capped has no effect on the direction of Primo Water i.e., Primo Water and IShares SPTSX go up and down completely randomly.

Pair Corralation between Primo Water and IShares SPTSX

Assuming the 90 days trading horizon Primo Water Corp is expected to generate 1.63 times more return on investment than IShares SPTSX. However, Primo Water is 1.63 times more volatile than iShares SPTSX Capped. It trades about 0.26 of its potential returns per unit of risk. iShares SPTSX Capped is currently generating about -0.26 per unit of risk. If you would invest  2,967  in Primo Water Corp on June 30, 2024 and sell it today you would earn a total of  412.00  from holding Primo Water Corp or generate 13.89% return on investment over 90 days.

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

Primo Water Corp  vs.  iShares SPTSX Capped

Primo Water Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Water Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Primo Water displayed solid returns over the last few months and may actually be approaching a breakup point.

iShares SPTSX Capped

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days iShares SPTSX Capped has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Etf's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the ETF investors.

Pair Trading with Primo Water and IShares SPTSX

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

The idea behind Primo Water Corp and iShares SPTSX Capped 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.