Correlation Between Cumberland Pharmaceuticals and Intracellular

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Intracellular

-0.61

Correlation Coefficient

Cumberland Pharmaceuticals  Intracellular

Excellent diversification

The 3 months correlation between Cumberland and Intracellular is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Intracellular Th in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intracellular Th 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 Intracellular. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intracellular Th has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Intracellular go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Intracellular

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 2.19 times less return on investment than Intracellular. In addition to that, Cumberland Pharmaceuticals is 1.82 times more volatile than Intracellular Th. It trades about 0.03 of its total potential returns per unit of risk. Intracellular Th is currently generating about 0.13 per unit of volatility. If you would invest  7,300  in Intracellular Th on September 3, 2024 and sell it today you would earn a total of  1,265  from holding Intracellular Th or generate 17.33% return on investment over 90 days.

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

Cumberland Pharmaceuticals  vs.  Intracellular Th

Cumberland Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cumberland Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Cumberland Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Intracellular Th

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intracellular Th are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Intracellular demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cumberland Pharmaceuticals and Intracellular

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

The idea behind Cumberland Pharmaceuticals and Intracellular Th 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.