Correlation Between Cumberland Pharmaceuticals and ASE Industrial
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and ASE Industrial 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 Cumberland Pharmaceuticals and ASE Industrial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and ASE Industrial Holding, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and ASE Industrial 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 Cumberland Pharmaceuticals with a short position of ASE Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and ASE Industrial.
Diversification Opportunities for Cumberland Pharmaceuticals and ASE Industrial
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cumberland and ASE is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and ASE Industrial Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASE Industrial Holding and Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals are associated (or correlated) with ASE Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASE Industrial Holding has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and ASE Industrial go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and ASE Industrial
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 3.1 times more return on investment than ASE Industrial. However, Cumberland Pharmaceuticals is 3.1 times more volatile than ASE Industrial Holding. It trades about 0.13 of its potential returns per unit of risk. ASE Industrial Holding is currently generating about 0.11 per unit of risk. If you would invest 114.00 in Cumberland Pharmaceuticals on September 4, 2024 and sell it today you would earn a total of 16.00 from holding Cumberland Pharmaceuticals or generate 14.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. ASE Industrial Holding
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| ASE Industrial Holding |
Cumberland Pharmaceuticals and ASE Industrial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and ASE Industrial
The main advantage of trading using opposite Cumberland Pharmaceuticals and ASE Industrial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, ASE Industrial 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 ASE Industrial will offset losses from the drop in ASE Industrial's long position.The idea behind Cumberland Pharmaceuticals and ASE Industrial Holding 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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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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