Correlation Between Acadia Healthcare and Prestige Brand

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

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

Diversification Opportunities for Acadia Healthcare and Prestige Brand

-0.6

Correlation Coefficient

Acadia Healthcare  Prestige Brand

Excellent diversification

The 3 months correlation between Acadia and Prestige is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Acadia Healthcare and Prestige Brand Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Brand Holdings and Acadia Healthcare 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 Acadia Healthcare are associated (or correlated) with Prestige Brand. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prestige Brand Holdings has no effect on the direction of Acadia Healthcare i.e., Acadia Healthcare and Prestige Brand go up and down completely randomly.

Pair Corralation between Acadia Healthcare and Prestige Brand

Given the investment horizon of 90 days Acadia Healthcare is expected to under-perform the Prestige Brand. In addition to that, Acadia Healthcare is 1.71 times more volatile than Prestige Brand Holdings. It trades about -0.08 of its total potential returns per unit of risk. Prestige Brand Holdings is currently generating about 0.08 per unit of volatility. If you would invest  7,738  in Prestige Brand Holdings on December 29, 2024 and sell it today you would earn a total of  866.00  from holding Prestige Brand Holdings or generate 11.19% return on investment over 90 days.

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

Acadia Healthcare  vs.  Prestige Brand Holdings

Acadia Healthcare

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acadia Healthcare has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Prestige Brand Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Brand Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, Prestige Brand may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Acadia Healthcare and Prestige Brand

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

The idea behind Acadia Healthcare and Prestige Brand Holdings 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..