Correlation Between Alkermes Plc and Prestige Brand

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

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

Diversification Opportunities for Alkermes Plc and Prestige Brand

0.84

Correlation Coefficient

Alkermes Plc  Prestige Brand

Very poor diversification

The 3 months correlation between Alkermes and Prestige is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Alkermes Plc 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 Alkermes Plc 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 Alkermes Plc 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 Alkermes Plc i.e., Alkermes Plc and Prestige Brand go up and down completely randomly.

Pair Corralation between Alkermes Plc and Prestige Brand

Given the investment horizon of 90 days Alkermes Plc is expected to generate 0.8 times more return on investment than Prestige Brand. However, Alkermes Plc is 1.25 times less risky than Prestige Brand. It trades about 0.13 of its potential returns per unit of risk. Prestige Brand Holdings is currently generating about 0.08 per unit of risk. If you would invest  2,878  in Alkermes Plc on December 29, 2024 and sell it today you would earn a total of  443.00  from holding Alkermes Plc or generate 15.39% return on investment over 90 days.

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

Alkermes Plc  vs.  Prestige Brand Holdings

Alkermes Plc

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alkermes Plc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent forward-looking signals, Alkermes Plc unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Alkermes Plc and Prestige Brand

The main advantage of trading using opposite Alkermes Plc and Prestige Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alkermes Plc 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 Alkermes Plc 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.