Correlation Between Cumberland Pharmaceuticals and Emerson Radio
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Emerson Radio 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 Emerson Radio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Emerson Radio, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Emerson Radio 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 Emerson Radio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Emerson Radio.
Diversification Opportunities for Cumberland Pharmaceuticals and Emerson Radio
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Cumberland and Emerson is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Emerson Radio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emerson Radio 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 Emerson Radio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emerson Radio has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Emerson Radio go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Emerson Radio
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the Emerson Radio. But the stock apears to be less risky and, when comparing its historical volatility, Cumberland Pharmaceuticals is 1.2 times less risky than Emerson Radio. The stock trades about -0.12 of its potential returns per unit of risk. The Emerson Radio is currently generating about -0.1 of returns per unit of risk over similar time horizon. If you would invest 51.00 in Emerson Radio on August 29, 2024 and sell it today you would lose (6.47) from holding Emerson Radio or give up 12.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Emerson Radio
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Emerson Radio |
Cumberland Pharmaceuticals and Emerson Radio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Emerson Radio
The main advantage of trading using opposite Cumberland Pharmaceuticals and Emerson Radio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Emerson Radio 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 Emerson Radio will offset losses from the drop in Emerson Radio's long position.| Cumberland Pharmaceuticals vs. Phibro Animal Health | Cumberland Pharmaceuticals vs. Procaps Group SA | Cumberland Pharmaceuticals vs. Amphastar P | Cumberland Pharmaceuticals vs. Alkermes Plc |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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