Correlation Between Prestige Brand and Silver Spike

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

Diversification Opportunities for Prestige Brand and Silver Spike

0.66

Correlation Coefficient

Prestige Brand  Silver Spike

Poor diversification

The 3 months correlation between Prestige and Silver is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Brand Holdings and Silver Spike Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Silver Spike Investment 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 Silver Spike. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Silver Spike Investment has no effect on the direction of Prestige Brand i.e., Prestige Brand and Silver Spike go up and down completely randomly.

Pair Corralation between Prestige Brand and Silver Spike

Considering the 90-day investment horizon Prestige Brand is expected to generate 1.09 times less return on investment than Silver Spike. But when comparing it to its historical volatility, Prestige Brand Holdings is 1.37 times less risky than Silver Spike. It trades about 0.2 of its potential returns per unit of risk. Silver Spike Investment is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,114  in Silver Spike Investment on September 12, 2024 and sell it today you would earn a total of  166.00  from holding Silver Spike Investment or generate 14.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Prestige Brand Holdings  vs.  Silver Spike Investment

Prestige Brand Holdings

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Brand Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, Prestige Brand demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Silver Spike Investment

Risk-Adjusted Performance

0 of 100

Good

Over the last 90 days Silver Spike Investment has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather fragile forward indicators, Silver Spike exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prestige Brand and Silver Spike

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

The idea behind Prestige Brand Holdings and Silver Spike Investment 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.