Correlation Between Cumberland Pharmaceuticals and Ironwood Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Ironwood Pharmaceuticals 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 Ironwood Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Ironwood Pharmaceuticals, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Ironwood Pharmaceuticals 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 Ironwood Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Ironwood Pharmaceuticals.
Diversification Opportunities for Cumberland Pharmaceuticals and Ironwood Pharmaceuticals
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cumberland and Ironwood is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Ironwood Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ironwood Pharmaceuticals 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 Ironwood Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ironwood Pharmaceuticals has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Ironwood Pharmaceuticals go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Ironwood Pharmaceuticals
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 0.41 times more return on investment than Ironwood Pharmaceuticals. However, Cumberland Pharmaceuticals is 2.46 times less risky than Ironwood Pharmaceuticals. It trades about -0.34 of its potential returns per unit of risk. Ironwood Pharmaceuticals is currently generating about -0.16 per unit of risk. If you would invest 125.00 in Cumberland Pharmaceuticals on August 28, 2024 and sell it today you would lose (19.00) from holding Cumberland Pharmaceuticals or give up 15.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Ironwood Pharmaceuticals
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Ironwood Pharmaceuticals |
Cumberland Pharmaceuticals and Ironwood Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Ironwood Pharmaceuticals
The main advantage of trading using opposite Cumberland Pharmaceuticals and Ironwood Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Ironwood Pharmaceuticals 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 Ironwood Pharmaceuticals will offset losses from the drop in Ironwood Pharmaceuticals' long position.| Cumberland Pharmaceuticals vs. Capricor Therapeutics | Cumberland Pharmaceuticals vs. Soleno Therapeutics | Cumberland Pharmaceuticals vs. Bio Path Holdings | Cumberland Pharmaceuticals vs. Moleculin Biotech |
| Ironwood Pharmaceuticals vs. Neurocrine Biosciences | Ironwood Pharmaceuticals vs. Amphastar P | Ironwood Pharmaceuticals vs. Collegium Pharmaceutical | Ironwood Pharmaceuticals vs. ANI Pharmaceuticals |
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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