Correlation Between Cumberland Pharmaceuticals and MusclePharm
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and MusclePharm 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 MusclePharm into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and MusclePharm, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and MusclePharm 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 MusclePharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and MusclePharm.
Diversification Opportunities for Cumberland Pharmaceuticals and MusclePharm
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Cumberland and MusclePharm is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and MusclePharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MusclePharm 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 MusclePharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MusclePharm has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and MusclePharm go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and MusclePharm
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the MusclePharm. But the stock apears to be less risky and, when comparing its historical volatility, Cumberland Pharmaceuticals is 21.43 times less risky than MusclePharm. The stock trades about 0.0 of its potential returns per unit of risk. The MusclePharm is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 0.05 in MusclePharm on September 3, 2024 and sell it today you would lose (0.05) from holding MusclePharm or give up 100.0% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 88.89% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. MusclePharm
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| MusclePharm |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Cumberland Pharmaceuticals and MusclePharm Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and MusclePharm
The main advantage of trading using opposite Cumberland Pharmaceuticals and MusclePharm positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, MusclePharm 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 MusclePharm will offset losses from the drop in MusclePharm's long position.The idea behind Cumberland Pharmaceuticals and MusclePharm 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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