Correlation Between Cumberland Pharmaceuticals and JD Sports
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and JD Sports 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 JD Sports into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and JD Sports Fashion, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and JD Sports 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 JD Sports. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and JD Sports.
Diversification Opportunities for Cumberland Pharmaceuticals and JD Sports
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cumberland and JDDSF is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and JD Sports Fashion in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Sports Fashion 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 JD Sports. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Sports Fashion has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and JD Sports go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and JD Sports
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the JD Sports. But the stock apears to be less risky and, when comparing its historical volatility, Cumberland Pharmaceuticals is 1.28 times less risky than JD Sports. The stock trades about -0.02 of its potential returns per unit of risk. The JD Sports Fashion is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 108.00 in JD Sports Fashion on August 26, 2024 and sell it today you would earn a total of 38.00 from holding JD Sports Fashion or generate 35.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. JD Sports Fashion
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| JD Sports Fashion |
Cumberland Pharmaceuticals and JD Sports Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and JD Sports
The main advantage of trading using opposite Cumberland Pharmaceuticals and JD Sports positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, JD Sports 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 JD Sports will offset losses from the drop in JD Sports' long position.The idea behind Cumberland Pharmaceuticals and JD Sports Fashion 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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