Correlation Between Cumberland Pharmaceuticals and Jumbo SA
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Jumbo SA 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 Jumbo SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Jumbo SA, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Jumbo SA 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 Jumbo SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Jumbo SA.
Diversification Opportunities for Cumberland Pharmaceuticals and Jumbo SA
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Cumberland and Jumbo is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Jumbo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jumbo SA 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 Jumbo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jumbo SA has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Jumbo SA go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Jumbo SA
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the Jumbo SA. But the stock apears to be less risky and, when comparing its historical volatility, Cumberland Pharmaceuticals is 1.28 times less risky than Jumbo SA. The stock trades about -0.02 of its potential returns per unit of risk. The Jumbo SA is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,924 in Jumbo SA on September 4, 2024 and sell it today you would earn a total of 826.00 from holding Jumbo SA or generate 42.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 24.14% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Jumbo SA
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Jumbo SA |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cumberland Pharmaceuticals and Jumbo SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Jumbo SA
The main advantage of trading using opposite Cumberland Pharmaceuticals and Jumbo SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Jumbo SA 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 Jumbo SA will offset losses from the drop in Jumbo SA's long position.The idea behind Cumberland Pharmaceuticals and Jumbo SA 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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