Correlation Between Cumberland Pharmaceuticals and Hurco Companies
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Hurco Companies 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 Hurco Companies into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Hurco Companies, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Hurco Companies 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 Hurco Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Hurco Companies.
Diversification Opportunities for Cumberland Pharmaceuticals and Hurco Companies
-0.6 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cumberland and Hurco is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Hurco Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hurco Companies 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 Hurco Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hurco Companies has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Hurco Companies go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Hurco Companies
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 2.38 times more return on investment than Hurco Companies. However, Cumberland Pharmaceuticals is 2.38 times more volatile than Hurco Companies. It trades about 0.14 of its potential returns per unit of risk. Hurco Companies is currently generating about 0.16 per unit of risk. If you would invest 119.00 in Cumberland Pharmaceuticals on August 31, 2024 and sell it today you would earn a total of 18.00 from holding Cumberland Pharmaceuticals or generate 15.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Hurco Companies
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Hurco Companies |
Cumberland Pharmaceuticals and Hurco Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Hurco Companies
The main advantage of trading using opposite Cumberland Pharmaceuticals and Hurco Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Hurco Companies 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 Hurco Companies will offset losses from the drop in Hurco Companies' long position.The idea behind Cumberland Pharmaceuticals and Hurco Companies 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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