Correlation Between Cumberland Pharmaceuticals and Orexo AB
Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Orexo AB 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 Orexo AB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cumberland Pharmaceuticals and Orexo AB, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Orexo AB 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 Orexo AB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Orexo AB.
Diversification Opportunities for Cumberland Pharmaceuticals and Orexo AB
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Cumberland and Orexo is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Orexo AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orexo AB 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 Orexo AB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orexo AB has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Orexo AB go up and down completely randomly.
Pair Corralation between Cumberland Pharmaceuticals and Orexo AB
Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 2.78 times less return on investment than Orexo AB. But when comparing it to its historical volatility, Cumberland Pharmaceuticals is 1.03 times less risky than Orexo AB. It trades about 0.01 of its potential returns per unit of risk. Orexo AB is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 104.00 in Orexo AB on August 31, 2024 and sell it today you would earn a total of 4.00 from holding Orexo AB or generate 3.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Cumberland Pharmaceuticals vs. Orexo AB
Performance |
| Timeline |
| Cumberland Pharmaceuticals |
| Orexo AB |
Cumberland Pharmaceuticals and Orexo AB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cumberland Pharmaceuticals and Orexo AB
The main advantage of trading using opposite Cumberland Pharmaceuticals and Orexo AB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Orexo AB 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 Orexo AB will offset losses from the drop in Orexo AB's long position.The idea behind Cumberland Pharmaceuticals and Orexo AB 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.
| Orexo AB vs. Genomma Lab Internacional | Orexo AB vs. Hypera SA | Orexo AB vs. Elanco Animal Health | Orexo AB vs. SIGA Technologies |
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
Other Complementary Tools
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Headlines Timeline Stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity | |
| Volatility Analysis Get historical volatility and risk analysis based on latest market data | |
| Latest Portfolios Quick portfolio dashboard that showcases your latest portfolios |