Correlation Between GOODYEAR T and Prestige Consumer

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

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

Diversification Opportunities for GOODYEAR T and Prestige Consumer

0.86

Correlation Coefficient

GOODYEAR T  Prestige Consumer

Very poor diversification

The 3 months correlation between GOODYEAR and Prestige is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding GOODYEAR T RUBBER and Prestige Consumer Healthcare in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prestige Consumer and GOODYEAR T 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 GOODYEAR T RUBBER 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 GOODYEAR T i.e., GOODYEAR T and Prestige Consumer go up and down completely randomly.

Pair Corralation between GOODYEAR T and Prestige Consumer

Assuming the 90 days trading horizon GOODYEAR T is expected to generate 1.83 times less return on investment than Prestige Consumer. In addition to that, GOODYEAR T is 1.8 times more volatile than Prestige Consumer Healthcare. It trades about 0.04 of its total potential returns per unit of risk. Prestige Consumer Healthcare is currently generating about 0.15 per unit of volatility. If you would invest  6,200  in Prestige Consumer Healthcare on October 11, 2024 and sell it today you would earn a total of  900.00  from holding Prestige Consumer Healthcare or generate 14.52% return on investment over 90 days.

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

GOODYEAR T RUBBER  vs.  Prestige Consumer Healthcare

GOODYEAR T RUBBER

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in GOODYEAR T RUBBER are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, GOODYEAR T may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Prestige Consumer

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Consumer Healthcare are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Prestige Consumer reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with GOODYEAR T and Prestige Consumer

The main advantage of trading using opposite GOODYEAR T and Prestige Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GOODYEAR T 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 GOODYEAR T RUBBER 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.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.