Correlation Between Phibro Animal and Prestige Brand

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

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

Diversification Opportunities for Phibro Animal and Prestige Brand

0.67

Correlation Coefficient

Phibro Animal  Prestige Brand

Poor diversification

The 3 months correlation between Phibro and Prestige is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Phibro Animal Health 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 Phibro Animal 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 Phibro Animal Health 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 Phibro Animal i.e., Phibro Animal and Prestige Brand go up and down completely randomly.

Pair Corralation between Phibro Animal and Prestige Brand

Given the investment horizon of 90 days Phibro Animal is expected to generate 1.88 times less return on investment than Prestige Brand. In addition to that, Phibro Animal is 1.37 times more volatile than Prestige Brand Holdings. It trades about 0.03 of its total potential returns per unit of risk. Prestige Brand Holdings is currently generating about 0.08 per unit of volatility. If you would invest  7,738  in Prestige Brand Holdings on December 30, 2024 and sell it today you would earn a total of  771.00  from holding Prestige Brand Holdings or generate 9.96% return on investment over 90 days.

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

Phibro Animal Health  vs.  Prestige Brand Holdings

Phibro Animal Health

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Phibro Animal Health are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical indicators, Phibro Animal is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Prestige Brand Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Brand Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, Prestige Brand may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Phibro Animal and Prestige Brand

The main advantage of trading using opposite Phibro Animal and Prestige Brand positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phibro Animal 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 Phibro Animal Health 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.