Correlation Between Emergent Biosolutions and Prestige Brand

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

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

Diversification Opportunities for Emergent Biosolutions and Prestige Brand

0.34

Correlation Coefficient

Emergent Biosolutions  Prestige Brand

Weak diversification

The 3 months correlation between Emergent and Prestige is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Emergent Biosolutions 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 Emergent Biosolutions 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 Emergent Biosolutions 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 Emergent Biosolutions i.e., Emergent Biosolutions and Prestige Brand go up and down completely randomly.

Pair Corralation between Emergent Biosolutions and Prestige Brand

Considering the 90-day investment horizon Emergent Biosolutions is expected to generate 3.11 times more return on investment than Prestige Brand. However, Emergent Biosolutions is 3.11 times more volatile than Prestige Brand Holdings. It trades about 0.0 of its potential returns per unit of risk. Prestige Brand Holdings is currently generating about -0.18 per unit of risk. If you would invest  827.00  in Emergent Biosolutions on September 20, 2024 and sell it today you would lose (11.00) from holding Emergent Biosolutions or give up 1.33% of portfolio value over 90 days.

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

Emergent Biosolutions  vs.  Prestige Brand Holdings

Emergent Biosolutions

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Prestige Brand Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Brand Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental drivers, Prestige Brand may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Emergent Biosolutions and Prestige Brand

The main advantage of trading using opposite Emergent Biosolutions and Prestige Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Emergent Biosolutions 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 Emergent Biosolutions 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.