Correlation Between Premium Beverage and Allergan Plc

Can any of the company-specific risk be diversified away by investing in both Premium Beverage and Allergan Plc 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 Premium Beverage and Allergan Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Premium Beverage Group and Allergan Plc, you can compare the effects of market volatilities on Premium Beverage and Allergan Plc 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 Premium Beverage with a short position of Allergan Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Premium Beverage and Allergan Plc.

Diversification Opportunities for Premium Beverage and Allergan Plc

0.0

Correlation Coefficient

Premium Beverage  Allergan Plc

Pay attention - limited upside

The 3 months correlation between Premium and Allergan is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Premium Beverage Group and Allergan Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allergan Plc and Premium Beverage 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 Premium Beverage Group are associated (or correlated) with Allergan Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allergan Plc has no effect on the direction of Premium Beverage i.e., Premium Beverage and Allergan Plc go up and down completely randomly.

Pair Corralation between Premium Beverage and Allergan Plc

If you would invest (100.00) in Allergan Plc on February 2, 2024 and sell it today you would earn a total of  100.00  from holding Allergan Plc or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Premium Beverage Group  vs.  Allergan Plc

Premium Beverage

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Premium Beverage Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Premium Beverage is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Allergan Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allergan Plc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Allergan Plc is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Premium Beverage and Allergan Plc

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

The idea behind Premium Beverage Group and Allergan Plc 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.