Correlation Between First Bancshares, and Primo Water

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

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

Diversification Opportunities for First Bancshares, and Primo Water

0.85

Correlation Coefficient

First Bancshares,  Primo Water

Very poor diversification

The 3 months correlation between First and Primo is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding The First Bancshares, 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 First Bancshares, 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 The First Bancshares, 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 First Bancshares, i.e., First Bancshares, and Primo Water go up and down completely randomly.

Pair Corralation between First Bancshares, and Primo Water

Given the investment horizon of 90 days The First Bancshares, is expected to generate 1.53 times more return on investment than Primo Water. However, First Bancshares, is 1.53 times more volatile than Primo Water Corp. It trades about 0.05 of its potential returns per unit of risk. Primo Water Corp is currently generating about -0.02 per unit of risk. If you would invest  3,230  in The First Bancshares, on September 23, 2024 and sell it today you would earn a total of  224.00  from holding The First Bancshares, or generate 6.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	55.38%
Values	Daily Returns

The First Bancshares,  vs.  Primo Water Corp

First Bancshares,

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The First Bancshares, are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting primary indicators, First Bancshares, may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Primo Water Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Primo Water Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Primo Water is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Bancshares, and Primo Water

The main advantage of trading using opposite First Bancshares, and Primo Water positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancshares, 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 The First Bancshares, 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.