Correlation Between Cumberland Pharmaceuticals and Barings BDC
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Barings BDC 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 Barings BDC into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Barings BDC, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Barings BDC 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 Barings BDC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Barings BDC.
Diversification Opportunities for Cumberland Pharmaceuticals and Barings BDC
-0.1 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cumberland and Barings is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Barings BDC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barings BDC 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 Barings BDC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barings BDC has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Barings BDC go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Barings BDC
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 5.59 times more return on investment than Barings BDC. However, Cumberland Pharmaceuticals is 5.59 times more volatile than Barings BDC. It trades about 0.1 of its potential returns per unit of risk. Barings BDC is currently generating about 0.37 per unit of risk. If you would invest 114.00 in Cumberland Pharmaceuticals on September 5, 2024 and sell it today you would earn a total of 11.00 from holding Cumberland Pharmaceuticals or generate 9.65% 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. Barings BDC
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Barings BDC |
Cumberland Pharmaceuticals and Barings BDC Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Barings BDC
The main advantage of trading using opposite Cumberland Pharmaceuticals and Barings BDC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Barings BDC 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 Barings BDC will offset losses from the drop in Barings BDC's long position.The idea behind Cumberland Pharmaceuticals and Barings BDC 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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