Correlation Between Cumberland Pharmaceuticals and Cheetah Net
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Cheetah Net 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 Cheetah Net into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Cheetah Net Supply, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Cheetah Net 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 Cheetah Net. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Cheetah Net.
Diversification Opportunities for Cumberland Pharmaceuticals and Cheetah Net
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cumberland and Cheetah is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Cheetah Net Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheetah Net Supply 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 Cheetah Net. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheetah Net Supply has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Cheetah Net go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Cheetah Net
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 0.46 times more return on investment than Cheetah Net. However, Cumberland Pharmaceuticals is 2.17 times less risky than Cheetah Net. It trades about 0.03 of its potential returns per unit of risk. Cheetah Net Supply is currently generating about -0.07 per unit of risk. If you would invest 135.00 in Cumberland Pharmaceuticals on September 3, 2024 and sell it today you would earn a total of 5.00 from holding Cumberland Pharmaceuticals or generate 3.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Cheetah Net Supply
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Cheetah Net Supply |
Cumberland Pharmaceuticals and Cheetah Net Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Cheetah Net
The main advantage of trading using opposite Cumberland Pharmaceuticals and Cheetah Net positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Cheetah Net 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 Cheetah Net will offset losses from the drop in Cheetah Net's long position.The idea behind Cumberland Pharmaceuticals and Cheetah Net Supply 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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