Correlation Between Primo Brands and Catalent

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

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

Diversification Opportunities for Primo Brands and Catalent

0.61

Correlation Coefficient

Primo Brands  Catalent

Poor diversification

The 3 months correlation between Primo and Catalent is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Primo Brands and Catalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalent 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 Catalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalent has no effect on the direction of Primo Brands i.e., Primo Brands and Catalent go up and down completely randomly.

Pair Corralation between Primo Brands and Catalent

Given the investment horizon of 90 days Primo Brands is expected to generate 3.26 times more return on investment than Catalent. However, Primo Brands is 3.26 times more volatile than Catalent. It trades about 0.19 of its potential returns per unit of risk. Catalent is currently generating about 0.15 per unit of risk. If you would invest  2,431  in Primo Brands on September 25, 2024 and sell it today you would earn a total of  669.00  from holding Primo Brands or generate 27.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Primo Brands  vs.  Catalent

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

Catalent

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Catalent are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable essential indicators, Catalent is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Primo Brands and Catalent

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

The idea behind Primo Brands and Catalent 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.

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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.