Correlation Between Prestige Brand and Ensign

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

Diversification Opportunities for Prestige Brand and Ensign

-0.58

Correlation Coefficient

Prestige Brand  Ensign

Excellent diversification

The 3 months correlation between Prestige and Ensign is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Brand Holdings and The Ensign Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ensign Group 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 Ensign. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ensign Group has no effect on the direction of Prestige Brand i.e., Prestige Brand and Ensign go up and down completely randomly.

Pair Corralation between Prestige Brand and Ensign

Considering the 90-day investment horizon Prestige Brand Holdings is expected to generate 1.2 times more return on investment than Ensign. However, Prestige Brand is 1.2 times more volatile than The Ensign Group. It trades about 0.08 of its potential returns per unit of risk. The Ensign Group is currently generating about -0.02 per unit of risk. If you would invest  7,738  in Prestige Brand Holdings on December 29, 2024 and sell it today you would earn a total of  866.00  from holding Prestige Brand Holdings or generate 11.19% return on investment over 90 days.

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

Prestige Brand Holdings  vs.  The Ensign Group

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.

Ensign Group

Risk-Adjusted Performance

Very Weak

Over the last 90 days The Ensign Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Ensign is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Prestige Brand and Ensign

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

The idea behind Prestige Brand Holdings and The Ensign Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.