Correlation Between Prestige Brand and Enhabit

Can any of the company-specific risk be diversified away by investing in both Prestige Brand and Enhabit 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 Enhabit 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 Enhabit, you can compare the effects of market volatilities on Prestige Brand and Enhabit 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 Enhabit. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prestige Brand and Enhabit.

Diversification Opportunities for Prestige Brand and Enhabit

0.59

Correlation Coefficient

Prestige Brand  Enhabit

Very weak diversification

The 3 months correlation between Prestige and Enhabit is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Brand Holdings and Enhabit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enhabit 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 Enhabit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enhabit has no effect on the direction of Prestige Brand i.e., Prestige Brand and Enhabit go up and down completely randomly.

Pair Corralation between Prestige Brand and Enhabit

Considering the 90-day investment horizon Prestige Brand is expected to generate 1.19 times less return on investment than Enhabit. In addition to that, Prestige Brand is 1.04 times more volatile than Enhabit. It trades about 0.08 of its total potential returns per unit of risk. Enhabit is currently generating about 0.1 per unit of volatility. If you would invest  769.00  in Enhabit on December 29, 2024 and sell it today you would earn a total of  95.00  from holding Enhabit or generate 12.35% return on investment over 90 days.

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

Prestige Brand Holdings  vs.  Enhabit

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.

Enhabit

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Enhabit are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Enhabit sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prestige Brand and Enhabit

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

The idea behind Prestige Brand Holdings and Enhabit 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.