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

0.44

Correlation Coefficient

Prestige Brand  Silver Spike

Very weak diversification

The 3 months correlation between Prestige and Silver is 0.44. 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 Holdings is expected to under-perform the Silver Spike. But the stock apears to be less risky and, when comparing its historical volatility, Prestige Brand Holdings is 1.31 times less risky than Silver Spike. The stock trades about -0.15 of its potential returns per unit of risk. The Silver Spike Investment is currently generating about 0.32 of returns per unit of risk over similar time horizon. If you would invest  956.00  in Silver Spike Investment on February 8, 2024 and sell it today you would earn a total of  184.00  from holding Silver Spike Investment or generate 19.25% 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.  Silver Spike Investment

Prestige Brand Holdings

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prestige Brand Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Prestige Brand is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Silver Spike Investment

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Silver Spike Investment are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.