Correlation Between Cumberland Pharmaceuticals and Black Hills
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Black Hills 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 Black Hills into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Black Hills, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Black Hills 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 Black Hills. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Black Hills.
Diversification Opportunities for Cumberland Pharmaceuticals and Black Hills
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cumberland and Black is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills 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 Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Black Hills go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Black Hills
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 10.29 times less return on investment than Black Hills. In addition to that, Cumberland Pharmaceuticals is 3.1 times more volatile than Black Hills. It trades about 0.0 of its total potential returns per unit of risk. Black Hills is currently generating about 0.11 per unit of volatility. If you would invest 5,513 in Black Hills on September 1, 2024 and sell it today you would earn a total of 894.00 from holding Black Hills or generate 16.22% 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. Black Hills
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Black Hills |
Cumberland Pharmaceuticals and Black Hills Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Black Hills
The main advantage of trading using opposite Cumberland Pharmaceuticals and Black Hills positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Black Hills 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 Black Hills will offset losses from the drop in Black Hills' long position.The idea behind Cumberland Pharmaceuticals and Black Hills 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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