Correlation Between AmerisourceBergen and Prestige Consumer

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

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

Diversification Opportunities for AmerisourceBergen and Prestige Consumer

0.74

Correlation Coefficient

AmerisourceBergen  Prestige Consumer

Poor diversification

The 3 months correlation between AmerisourceBergen and Prestige is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AmerisourceBergen and Prestige Consumer Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Consumer and AmerisourceBergen 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 AmerisourceBergen 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 AmerisourceBergen i.e., AmerisourceBergen and Prestige Consumer go up and down completely randomly.

Pair Corralation between AmerisourceBergen and Prestige Consumer

Assuming the 90 days horizon AmerisourceBergen is expected to generate 1.09 times more return on investment than Prestige Consumer. However, AmerisourceBergen is 1.09 times more volatile than Prestige Consumer Healthcare. It trades about -0.22 of its potential returns per unit of risk. Prestige Consumer Healthcare is currently generating about -0.51 per unit of risk. If you would invest  22,845  in AmerisourceBergen on October 10, 2024 and sell it today you would lose (1,075) from holding AmerisourceBergen or give up 4.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

AmerisourceBergen  vs.  Prestige Consumer Healthcare

AmerisourceBergen

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AmerisourceBergen are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, AmerisourceBergen may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Prestige Consumer

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Consumer Healthcare are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prestige Consumer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AmerisourceBergen and Prestige Consumer

The main advantage of trading using opposite AmerisourceBergen and Prestige Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AmerisourceBergen 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 AmerisourceBergen 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..