Correlation Between Prestige Brand and Emergent Biosolutions

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

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

Diversification Opportunities for Prestige Brand and Emergent Biosolutions

0.34

Correlation Coefficient

Prestige Brand  Emergent Biosolutions

Weak diversification

The 3 months correlation between Prestige and Emergent is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Brand Holdings and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions and Prestige Brand 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 Prestige Brand Holdings are associated (or correlated) with Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of Prestige Brand i.e., Prestige Brand and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between Prestige Brand and Emergent Biosolutions

Considering the 90-day investment horizon Prestige Brand Holdings is expected to under-perform the Emergent Biosolutions. But the stock apears to be less risky and, when comparing its historical volatility, Prestige Brand Holdings is 3.11 times less risky than Emergent Biosolutions. The stock trades about -0.18 of its potential returns per unit of risk. The Emergent Biosolutions is currently generating about 0.0 of returns per unit of risk over similar time horizon. 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

Prestige Brand Holdings  vs.  Emergent Biosolutions

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.

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.

Pair Trading with Prestige Brand and Emergent Biosolutions

The main advantage of trading using opposite Prestige Brand and Emergent Biosolutions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prestige Brand position performs unexpectedly, Emergent Biosolutions 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 Emergent Biosolutions will offset losses from the drop in Emergent Biosolutions' long position.

The idea behind Prestige Brand Holdings and Emergent Biosolutions 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.