Correlation Between Cumberland Pharmaceuticals and Sealed Air

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Sealed Air

-0.34

Correlation Coefficient

Cumberland Pharmaceuticals  Sealed Air

Very good diversification

The 3 months correlation between Cumberland and Sealed is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Sealed Air in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sealed Air 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 Sealed Air. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sealed Air has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Sealed Air go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Sealed Air

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 3.99 times more return on investment than Sealed Air. However, Cumberland Pharmaceuticals is 3.99 times more volatile than Sealed Air. It trades about 0.01 of its potential returns per unit of risk. Sealed Air is currently generating about -0.05 per unit of risk. If you would invest  120.00  in Cumberland Pharmaceuticals on September 7, 2024 and sell it today you would lose (2.00) from holding Cumberland Pharmaceuticals or give up 1.67% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Cumberland Pharmaceuticals  vs.  Sealed Air

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Sealed Air

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sealed Air are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Sealed Air may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Cumberland Pharmaceuticals and Sealed Air

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

The idea behind Cumberland Pharmaceuticals and Sealed Air 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.