Correlation Between Weyco and Cumberland Pharmaceuticals

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

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

Diversification Opportunities for Weyco and Cumberland Pharmaceuticals

-0.48

Correlation Coefficient

Weyco  Cumberland Pharmaceuticals

Very good diversification

The 3 months correlation between Weyco and Cumberland is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Weyco Group and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and Weyco 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 Weyco Group 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 Weyco i.e., Weyco and Cumberland Pharmaceuticals go up and down completely randomly.

Pair Corralation between Weyco and Cumberland Pharmaceuticals

Given the investment horizon of 90 days Weyco Group is expected to generate 0.58 times more return on investment than Cumberland Pharmaceuticals. However, Weyco Group is 1.71 times less risky than Cumberland Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest  2,302  in Weyco Group on September 5, 2024 and sell it today you would earn a total of  1,263  from holding Weyco Group or generate 54.87% return on investment over 90 days.

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

Weyco Group  vs.  Cumberland Pharmaceuticals

Weyco Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Weyco Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Weyco may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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.

Pair Trading with Weyco and Cumberland Pharmaceuticals

The main advantage of trading using opposite Weyco and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Weyco 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.

The idea behind Weyco Group and Cumberland Pharmaceuticals 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 Transaction History module to view history of all your transactions and understand their impact on performance.