Correlation Between CARGOJET INC and Prestige Consumer

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

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

Diversification Opportunities for CARGOJET INC and Prestige Consumer

-0.25

Correlation Coefficient

CARGOJET INC  Prestige Consumer

Very good diversification

The 3 months correlation between CARGOJET and Prestige is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding CARGOJET INC VAR and Prestige Consumer Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Consumer and CARGOJET INC 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 CARGOJET INC VAR 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 CARGOJET INC i.e., CARGOJET INC and Prestige Consumer go up and down completely randomly.

Pair Corralation between CARGOJET INC and Prestige Consumer

Assuming the 90 days trading horizon CARGOJET INC VAR is expected to under-perform the Prestige Consumer. In addition to that, CARGOJET INC is 1.21 times more volatile than Prestige Consumer Healthcare. It trades about -0.06 of its total potential returns per unit of risk. Prestige Consumer Healthcare is currently generating about 0.09 per unit of volatility. If you would invest  6,700  in Prestige Consumer Healthcare on October 26, 2024 and sell it today you would earn a total of  600.00  from holding Prestige Consumer Healthcare or generate 8.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

CARGOJET INC VAR  vs.  Prestige Consumer Healthcare

CARGOJET INC VAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CARGOJET INC VAR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile 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

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Consumer Healthcare are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Prestige Consumer may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CARGOJET INC and Prestige Consumer

The main advantage of trading using opposite CARGOJET INC and Prestige Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CARGOJET INC 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 CARGOJET INC VAR 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.