Correlation Between Prestige Consumer and SINOPHARM GROUP

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

By analyzing existing cross correlation between Prestige Consumer Healthcare and SINOPHARM GROUP 15ON, you can compare the effects of market volatilities on Prestige Consumer and SINOPHARM GROUP 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 Consumer with a short position of SINOPHARM GROUP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prestige Consumer and SINOPHARM GROUP.

Diversification Opportunities for Prestige Consumer and SINOPHARM GROUP

0.49

Correlation Coefficient

Prestige Consumer  SINOPHARM GROUP

Very weak diversification

The 3 months correlation between Prestige and SINOPHARM is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Consumer Healthcare and SINOPHARM GROUP 15ON in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SINOPHARM GROUP 15ON and Prestige Consumer 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 Consumer Healthcare are associated (or correlated) with SINOPHARM GROUP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SINOPHARM GROUP 15ON has no effect on the direction of Prestige Consumer i.e., Prestige Consumer and SINOPHARM GROUP go up and down completely randomly.

Pair Corralation between Prestige Consumer and SINOPHARM GROUP

Assuming the 90 days horizon Prestige Consumer is expected to generate 2.26 times less return on investment than SINOPHARM GROUP. But when comparing it to its historical volatility, Prestige Consumer Healthcare is 1.68 times less risky than SINOPHARM GROUP. It trades about 0.13 of its potential returns per unit of risk. SINOPHARM GROUP 15ON is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  970.00  in SINOPHARM GROUP 15ON on September 23, 2024 and sell it today you would earn a total of  340.00  from holding SINOPHARM GROUP 15ON or generate 35.05% return on investment over 90 days.

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

Prestige Consumer Healthcare  vs.  SINOPHARM GROUP 15ON

Prestige Consumer

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Consumer Healthcare are ranked lower than 10 (%) 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.

SINOPHARM GROUP 15ON

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in SINOPHARM GROUP 15ON are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SINOPHARM GROUP reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prestige Consumer and SINOPHARM GROUP

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

The idea behind Prestige Consumer Healthcare and SINOPHARM GROUP 15ON 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.