Correlation Between Academy Sports and Cumberland Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both Academy Sports and Cumberland Pharmaceuticals 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 Academy Sports and Cumberland Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Academy Sports Outdoors and Cumberland Pharmaceuticals, you can compare the effects of market volatilities on Academy Sports and Cumberland Pharmaceuticals 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 Academy Sports with a short position of Cumberland Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Academy Sports and Cumberland Pharmaceuticals.

Diversification Opportunities for Academy Sports and Cumberland Pharmaceuticals

0.55
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Academy and Cumberland is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Academy Sports Outdoors and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and Academy Sports 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 Academy Sports Outdoors are associated (or correlated) with Cumberland Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumberland Pharmaceuticals has no effect on the direction of Academy Sports i.e., Academy Sports and Cumberland Pharmaceuticals go up and down completely randomly.

Pair Corralation between Academy Sports and Cumberland Pharmaceuticals

Considering the 90-day investment horizon Academy Sports Outdoors is expected to generate 0.68 times more return on investment than Cumberland Pharmaceuticals. However, Academy Sports Outdoors is 1.47 times less risky than Cumberland Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.02 per unit of risk. If you would invest  4,759  in Academy Sports Outdoors on August 26, 2024 and sell it today you would lose (95.00) from holding Academy Sports Outdoors or give up 2.0% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Academy Sports Outdoors  vs.  Cumberland Pharmaceuticals

 Performance 
       Timeline  
Academy Sports Outdoors 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Academy Sports Outdoors has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Cumberland Pharmaceuticals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Cumberland Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Academy Sports and Cumberland Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Academy Sports and Cumberland Pharmaceuticals

The main advantage of trading using opposite Academy Sports and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Academy Sports position performs unexpectedly, Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals will offset losses from the drop in Cumberland Pharmaceuticals' long position.
The idea behind Academy Sports Outdoors and Cumberland Pharmaceuticals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.

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