Correlation Between Cumberland Pharmaceuticals and Dine Brands
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Dine Brands 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 Dine Brands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Dine Brands Global, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Dine Brands 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 Dine Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Dine Brands.
Diversification Opportunities for Cumberland Pharmaceuticals and Dine Brands
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cumberland and Dine is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Dine Brands Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dine Brands Global 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 Dine Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dine Brands Global has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Dine Brands go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Dine Brands
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 1.54 times more return on investment than Dine Brands. However, Cumberland Pharmaceuticals is 1.54 times more volatile than Dine Brands Global. It trades about -0.01 of its potential returns per unit of risk. Dine Brands Global is currently generating about -0.03 per unit of risk. If you would invest 215.00 in Cumberland Pharmaceuticals on September 3, 2024 and sell it today you would lose (85.00) from holding Cumberland Pharmaceuticals or give up 39.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Dine Brands Global
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Dine Brands Global |
Cumberland Pharmaceuticals and Dine Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Dine Brands
The main advantage of trading using opposite Cumberland Pharmaceuticals and Dine Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Dine Brands 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 Dine Brands will offset losses from the drop in Dine Brands' long position.The idea behind Cumberland Pharmaceuticals and Dine Brands Global 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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