Correlation Between SBM Offshore and Cumberland Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both SBM Offshore 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 SBM Offshore and Cumberland Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SBM Offshore NV and Cumberland Pharmaceuticals, you can compare the effects of market volatilities on SBM Offshore 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 SBM Offshore with a short position of Cumberland Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of SBM Offshore and Cumberland Pharmaceuticals.
Diversification Opportunities for SBM Offshore and Cumberland Pharmaceuticals
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between SBM and Cumberland is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding SBM Offshore NV and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and SBM Offshore 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 SBM Offshore NV 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 SBM Offshore i.e., SBM Offshore and Cumberland Pharmaceuticals go up and down completely randomly.
Pair Corralation between SBM Offshore and Cumberland Pharmaceuticals
Assuming the 90 days horizon SBM Offshore NV is expected to generate 0.58 times more return on investment than Cumberland Pharmaceuticals. However, SBM Offshore NV is 1.74 times less risky than Cumberland Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest 1,211 in SBM Offshore NV on September 1, 2024 and sell it today you would earn a total of 669.00 from holding SBM Offshore NV or generate 55.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 71.0% |
| Values | Daily Returns |
SBM Offshore NV vs. Cumberland Pharmaceuticals
Performance |
| Timeline |
| SBM Offshore NV |
| Cumberland Pharmaceuticals |
SBM Offshore and Cumberland Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SBM Offshore and Cumberland Pharmaceuticals
The main advantage of trading using opposite SBM Offshore and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SBM Offshore 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.| SBM Offshore vs. Expro Group Holdings | SBM Offshore vs. ChampionX | SBM Offshore vs. Ranger Energy Services | SBM Offshore vs. Cactus Inc |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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