Correlation Between GOODTECH ASA and Prestige Consumer

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

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

Diversification Opportunities for GOODTECH ASA and Prestige Consumer

-0.74

Correlation Coefficient

GOODTECH ASA  Prestige Consumer

Pay attention - limited upside

The 3 months correlation between GOODTECH and Prestige is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding GOODTECH ASA A and Prestige Consumer Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Consumer and GOODTECH ASA 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 GOODTECH ASA A are associated (or correlated) with Prestige Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Consumer has no effect on the direction of GOODTECH ASA i.e., GOODTECH ASA and Prestige Consumer go up and down completely randomly.

Pair Corralation between GOODTECH ASA and Prestige Consumer

Assuming the 90 days horizon GOODTECH ASA A is expected to generate 1.74 times more return on investment than Prestige Consumer. However, GOODTECH ASA is 1.74 times more volatile than Prestige Consumer Healthcare. It trades about 0.16 of its potential returns per unit of risk. Prestige Consumer Healthcare is currently generating about -0.47 per unit of risk. If you would invest  83.00  in GOODTECH ASA A on October 11, 2024 and sell it today you would earn a total of  4.00  from holding GOODTECH ASA A or generate 4.82% return on investment over 90 days.

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

GOODTECH ASA A  vs.  Prestige Consumer Healthcare

GOODTECH ASA A

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GOODTECH ASA A has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Prestige Consumer

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Consumer Healthcare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Prestige Consumer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GOODTECH ASA and Prestige Consumer

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

The idea behind GOODTECH ASA A and Prestige Consumer Healthcare 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.