Correlation Between Prestige Brand and Esperion Therapeutics
Can any of the company-specific risk be diversified away by investing in both Prestige Brand and Esperion Therapeutics 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 Esperion Therapeutics 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 Esperion Therapeutics, you can compare the effects of market volatilities on Prestige Brand and Esperion Therapeutics 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 Esperion Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prestige Brand and Esperion Therapeutics.
Diversification Opportunities for Prestige Brand and Esperion Therapeutics
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prestige and Esperion is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Prestige Brand Holdings and Esperion Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Esperion Therapeutics 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 Esperion Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Esperion Therapeutics has no effect on the direction of Prestige Brand i.e., Prestige Brand and Esperion Therapeutics go up and down completely randomly.
Pair Corralation between Prestige Brand and Esperion Therapeutics
Considering the 90-day investment horizon Prestige Brand is expected to generate 2.57 times less return on investment than Esperion Therapeutics. But when comparing it to its historical volatility, Prestige Brand Holdings is 4.15 times less risky than Esperion Therapeutics. It trades about 0.51 of its potential returns per unit of risk. Esperion Therapeutics is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 203.00 in Esperion Therapeutics on September 2, 2024 and sell it today you would earn a total of 77.00 from holding Esperion Therapeutics or generate 37.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prestige Brand Holdings vs. Esperion Therapeutics
Performance |
| Timeline |
| Prestige Brand Holdings |
| Esperion Therapeutics |
Prestige Brand and Esperion Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prestige Brand and Esperion Therapeutics
The main advantage of trading using opposite Prestige Brand and Esperion Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prestige Brand position performs unexpectedly, Esperion Therapeutics 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 Esperion Therapeutics will offset losses from the drop in Esperion Therapeutics' long position.| Prestige Brand vs. Crinetics Pharmaceuticals | Prestige Brand vs. Enanta Pharmaceuticals | Prestige Brand vs. Amicus Therapeutics | Prestige Brand vs. Connect Biopharma Holdings |
| Esperion Therapeutics vs. Elanco Animal Health | Esperion Therapeutics vs. SIGA Technologies | Esperion Therapeutics vs. Catalent | Esperion Therapeutics vs. ANI Pharmaceuticals |
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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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