Correlation Between FAST RETAIL and Prestige Consumer

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

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

Diversification Opportunities for FAST RETAIL and Prestige Consumer

-0.09

Correlation Coefficient

FAST RETAIL  Prestige Consumer

Good diversification

The 3 months correlation between FAST and Prestige is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding FAST RETAIL ADR and Prestige Consumer Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Consumer and FAST RETAIL 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 FAST RETAIL ADR 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 FAST RETAIL i.e., FAST RETAIL and Prestige Consumer go up and down completely randomly.

Pair Corralation between FAST RETAIL and Prestige Consumer

Assuming the 90 days trading horizon FAST RETAIL ADR is expected to under-perform the Prestige Consumer. But the stock apears to be less risky and, when comparing its historical volatility, FAST RETAIL ADR is 1.33 times less risky than Prestige Consumer. The stock trades about -0.14 of its potential returns per unit of risk. The Prestige Consumer Healthcare is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  7,550  in Prestige Consumer Healthcare on December 21, 2024 and sell it today you would earn a total of  100.00  from holding Prestige Consumer Healthcare or generate 1.32% return on investment over 90 days.

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

FAST RETAIL ADR  vs.  Prestige Consumer Healthcare

FAST RETAIL ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days FAST RETAIL ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Prestige Consumer

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Consumer Healthcare are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Prestige Consumer is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with FAST RETAIL and Prestige Consumer

The main advantage of trading using opposite FAST RETAIL and Prestige Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FAST RETAIL 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 FAST RETAIL ADR 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.