Correlation Between Clean Science and Prestige Biologics

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

By analyzing existing cross correlation between Clean Science co and Prestige Biologics Co, you can compare the effects of market volatilities on Clean Science and Prestige Biologics 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 Clean Science with a short position of Prestige Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clean Science and Prestige Biologics.

Diversification Opportunities for Clean Science and Prestige Biologics

0.8

Correlation Coefficient

Clean Science  Prestige Biologics

Very poor diversification

The 3 months correlation between Clean and Prestige is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Clean Science co and Prestige Biologics Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Biologics and Clean Science 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 Clean Science co are associated (or correlated) with Prestige Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Biologics has no effect on the direction of Clean Science i.e., Clean Science and Prestige Biologics go up and down completely randomly.

Pair Corralation between Clean Science and Prestige Biologics

Assuming the 90 days trading horizon Clean Science co is expected to under-perform the Prestige Biologics. But the stock apears to be less risky and, when comparing its historical volatility, Clean Science co is 1.62 times less risky than Prestige Biologics. The stock trades about -0.06 of its potential returns per unit of risk. The Prestige Biologics Co is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  322,000  in Prestige Biologics Co on October 6, 2024 and sell it today you would earn a total of  183,000  from holding Prestige Biologics Co or generate 56.83% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	99.79%
Values	Daily Returns

Clean Science co  vs.  Prestige Biologics Co

Clean Science co

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clean Science co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Prestige Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prestige Biologics Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Clean Science and Prestige Biologics

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

The idea behind Clean Science co and Prestige Biologics Co 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.