Correlation Between Prestige Biologics and MedPacto

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

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

Diversification Opportunities for Prestige Biologics and MedPacto

0.62

Correlation Coefficient

Prestige Biologics  MedPacto

Poor diversification

The 3 months correlation between Prestige and MedPacto is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Biologics Co and MedPacto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MedPacto and Prestige Biologics 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 Prestige Biologics Co are associated (or correlated) with MedPacto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MedPacto has no effect on the direction of Prestige Biologics i.e., Prestige Biologics and MedPacto go up and down completely randomly.

Pair Corralation between Prestige Biologics and MedPacto

Assuming the 90 days trading horizon Prestige Biologics Co is expected to under-perform the MedPacto. But the stock apears to be less risky and, when comparing its historical volatility, Prestige Biologics Co is 1.03 times less risky than MedPacto. The stock trades about -0.07 of its potential returns per unit of risk. The MedPacto is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  467,500  in MedPacto on September 20, 2024 and sell it today you would lose (2,500) from holding MedPacto or give up 0.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.65%
Values	Daily Returns

Prestige Biologics Co  vs.  MedPacto

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

MedPacto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MedPacto has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Prestige Biologics and MedPacto

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

The idea behind Prestige Biologics Co and MedPacto 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .