Correlation Between PepsiCo and Primo Water

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

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

Diversification Opportunities for PepsiCo and Primo Water

0.41

Correlation Coefficient

PepsiCo  Primo Water

Very weak diversification

The 3 months correlation between PepsiCo and Primo is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PepsiCo and Primo Water Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Primo Water Corp and PepsiCo 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 PepsiCo are associated (or correlated) with Primo Water. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Primo Water Corp has no effect on the direction of PepsiCo i.e., PepsiCo and Primo Water go up and down completely randomly.

Pair Corralation between PepsiCo and Primo Water

Considering the 90-day investment horizon PepsiCo is expected to generate 9.55 times less return on investment than Primo Water. But when comparing it to its historical volatility, PepsiCo is 1.21 times less risky than Primo Water. It trades about 0.03 of its potential returns per unit of risk. Primo Water Corp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,527  in Primo Water Corp on January 31, 2024 and sell it today you would earn a total of  370.00  from holding Primo Water Corp or generate 24.23% return on investment over 90 days.

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

PepsiCo  vs.  Primo Water Corp

PepsiCo

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PepsiCo are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, PepsiCo is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Primo Water Corp

Risk-Adjusted Performance

27 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Primo Water Corp are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating primary indicators, Primo Water showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepsiCo and Primo Water

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

The idea behind PepsiCo and Primo Water 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.