Correlation Between Dow Jones and Cumberland Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Dow Jones and Cumberland Pharmaceuticals 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 Dow Jones and Cumberland Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dow Jones Industrial and Cumberland Pharmaceuticals, you can compare the effects of market volatilities on Dow Jones and Cumberland Pharmaceuticals 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 Dow Jones with a short position of Cumberland Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dow Jones and Cumberland Pharmaceuticals.
Diversification Opportunities for Dow Jones and Cumberland Pharmaceuticals
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Dow and Cumberland is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Dow Jones Industrial and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and Dow Jones 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 Dow Jones Industrial are associated (or correlated) with Cumberland Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumberland Pharmaceuticals has no effect on the direction of Dow Jones i.e., Dow Jones and Cumberland Pharmaceuticals go up and down completely randomly.
Pair Corralation between Dow Jones and Cumberland Pharmaceuticals
Assuming the 90 days trading horizon Dow Jones is expected to generate 4.75 times less return on investment than Cumberland Pharmaceuticals. But when comparing it to its historical volatility, Dow Jones Industrial is 9.36 times less risky than Cumberland Pharmaceuticals. It trades about 0.09 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 150.00 in Cumberland Pharmaceuticals on October 23, 2024 and sell it today you would earn a total of 103.00 from holding Cumberland Pharmaceuticals or generate 68.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.74% |
| Values | Daily Returns |
Dow Jones Industrial vs. Cumberland Pharmaceuticals
Performance |
| Timeline |
Dow Jones and Cumberland Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Dow Jones Industrial
Pair trading matchups for Dow Jones
Cumberland Pharmaceuticals
Pair trading matchups for Cumberland Pharmaceuticals
Pair Trading with Dow Jones and Cumberland Pharmaceuticals
The main advantage of trading using opposite Dow Jones and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dow Jones position performs unexpectedly, Cumberland Pharmaceuticals 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 Cumberland Pharmaceuticals will offset losses from the drop in Cumberland Pharmaceuticals' long position.| Dow Jones vs. Grupo Televisa SAB | Dow Jones vs. NiSource | Dow Jones vs. Kinetik Holdings | Dow Jones vs. Empresa Distribuidora y |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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