Correlation Between Cumberland Pharmaceuticals and Hawkins

Can any of the company-specific risk be diversified away by investing in both Cumberland Pharmaceuticals and Hawkins 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 Hawkins into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cumberland Pharmaceuticals and Hawkins, you can compare the effects of market volatilities on Cumberland Pharmaceuticals and Hawkins 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 Hawkins. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cumberland Pharmaceuticals and Hawkins.

Diversification Opportunities for Cumberland Pharmaceuticals and Hawkins

0.1

Correlation Coefficient

Cumberland Pharmaceuticals  Hawkins

Average diversification

The 3 months correlation between Cumberland and Hawkins is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Hawkins in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hawkins 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 Hawkins. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hawkins has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Hawkins go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Hawkins

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the Hawkins. In addition to that, Cumberland Pharmaceuticals is 1.59 times more volatile than Hawkins. It trades about 0.0 of its total potential returns per unit of risk. Hawkins is currently generating about 0.11 per unit of volatility. If you would invest  11,784  in Hawkins on September 5, 2024 and sell it today you would earn a total of  1,977  from holding Hawkins or generate 16.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Cumberland Pharmaceuticals  vs.  Hawkins

Cumberland Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cumberland Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Cumberland Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hawkins

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hawkins are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting forward-looking signals, Hawkins displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cumberland Pharmaceuticals and Hawkins

The main advantage of trading using opposite Cumberland Pharmaceuticals and Hawkins positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cumberland Pharmaceuticals position performs unexpectedly, Hawkins 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 Hawkins will offset losses from the drop in Hawkins' long position.

The idea behind Cumberland Pharmaceuticals and Hawkins 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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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.