Correlation Between Cumberland Pharmaceuticals and Cardinal Health
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Cardinal Health 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 Cardinal Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Cardinal Health, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Cardinal Health 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 Cardinal Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Cardinal Health.
Diversification Opportunities for Cumberland Pharmaceuticals and Cardinal Health
-0.41 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cumberland and Cardinal is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Cardinal Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardinal Health 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 Cardinal Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardinal Health has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Cardinal Health go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Cardinal Health
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 3.14 times more return on investment than Cardinal Health. However, Cumberland Pharmaceuticals is 3.14 times more volatile than Cardinal Health. It trades about 0.22 of its potential returns per unit of risk. Cardinal Health is currently generating about 0.15 per unit of risk. If you would invest 112.00 in Cumberland Pharmaceuticals on September 2, 2024 and sell it today you would earn a total of 28.00 from holding Cumberland Pharmaceuticals or generate 25.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Cardinal Health
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Cardinal Health |
Cumberland Pharmaceuticals and Cardinal Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Cardinal Health
The main advantage of trading using opposite Cumberland Pharmaceuticals and Cardinal Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Cardinal Health 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 Cardinal Health will offset losses from the drop in Cardinal Health's long position.The idea behind Cumberland Pharmaceuticals and Cardinal Health 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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