Correlation Between Cumberland Pharmaceuticals and Painreform

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Painreform

0.29

Correlation Coefficient

Cumberland Pharmaceuticals  Painreform

Modest diversification

The 3 months correlation between Cumberland and Painreform is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Painreform in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Painreform 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 Painreform. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Painreform has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Painreform go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Painreform

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the Painreform. But the stock apears to be less risky and, when comparing its historical volatility, Cumberland Pharmaceuticals is 5.76 times less risky than Painreform. The stock trades about 0.0 of its potential returns per unit of risk. The Painreform is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  498.00  in Painreform on September 5, 2024 and sell it today you would lose (213.00) from holding Painreform or give up 42.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Cumberland Pharmaceuticals  vs.  Painreform

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.

Painreform

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Painreform are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent technical and fundamental indicators, Painreform showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cumberland Pharmaceuticals and Painreform

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

The idea behind Cumberland Pharmaceuticals and Painreform 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.