Correlation Between Cumberland Pharmaceuticals and Lindblad Expeditions
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Lindblad Expeditions 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 Lindblad Expeditions into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Lindblad Expeditions Holdings, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Lindblad Expeditions 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 Lindblad Expeditions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Lindblad Expeditions.
Diversification Opportunities for Cumberland Pharmaceuticals and Lindblad Expeditions
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Cumberland and Lindblad is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Lindblad Expeditions Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lindblad Expeditions 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 Lindblad Expeditions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lindblad Expeditions has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Lindblad Expeditions go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Lindblad Expeditions
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the Lindblad Expeditions. But the stock apears to be less risky and, when comparing its historical volatility, Cumberland Pharmaceuticals is 1.17 times less risky than Lindblad Expeditions. The stock trades about -0.02 of its potential returns per unit of risk. The Lindblad Expeditions Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 893.00 in Lindblad Expeditions Holdings on August 26, 2024 and sell it today you would earn a total of 392.00 from holding Lindblad Expeditions Holdings or generate 43.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Lindblad Expeditions Holdings
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Lindblad Expeditions |
Cumberland Pharmaceuticals and Lindblad Expeditions Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Lindblad Expeditions
The main advantage of trading using opposite Cumberland Pharmaceuticals and Lindblad Expeditions positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Lindblad Expeditions 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 Lindblad Expeditions will offset losses from the drop in Lindblad Expeditions' long position.The idea behind Cumberland Pharmaceuticals and Lindblad Expeditions Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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