Correlation Between City View and Prestige Brand

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

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

Diversification Opportunities for City View and Prestige Brand

0.51

Correlation Coefficient

City View  Prestige Brand

Very weak diversification

The 3 months correlation between City and Prestige is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding City View Green 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 City View 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 City View Green 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 City View i.e., City View and Prestige Brand go up and down completely randomly.

Pair Corralation between City View and Prestige Brand

Assuming the 90 days horizon City View Green is expected to under-perform the Prestige Brand. In addition to that, City View is 1.7 times more volatile than Prestige Brand Holdings. It trades about -0.22 of its total potential returns per unit of risk. Prestige Brand Holdings is currently generating about 0.13 per unit of volatility. If you would invest  7,930  in Prestige Brand Holdings on November 20, 2024 and sell it today you would earn a total of  670.00  from holding Prestige Brand Holdings or generate 8.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.24%
Values	Daily Returns

City View Green  vs.  Prestige Brand Holdings

City View Green

Risk-Adjusted Performance

Very Weak

Over the last 90 days City View Green has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, City View may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Prestige Brand Holdings

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Brand Holdings are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Prestige Brand is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with City View and Prestige Brand

The main advantage of trading using opposite City View and Prestige Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City View 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 City View Green 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.