Correlation Between Cumberland Pharmaceuticals and Agilent Technologies

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Agilent Technologies

0.01

Correlation Coefficient

Cumberland Pharmaceuticals  Agilent Technologies

Significant diversification

The 3 months correlation between Cumberland and Agilent is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Agilent Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agilent Technologies 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 Agilent Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agilent Technologies has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Agilent Technologies go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Agilent Technologies

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 18.36 times more return on investment than Agilent Technologies. However, Cumberland Pharmaceuticals is 18.36 times more volatile than Agilent Technologies. It trades about 0.22 of its potential returns per unit of risk. Agilent Technologies is currently generating about -0.05 per unit of risk. If you would invest  118.00  in Cumberland Pharmaceuticals on October 6, 2024 and sell it today you would earn a total of  112.00  from holding Cumberland Pharmaceuticals or generate 94.92% 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.  Agilent Technologies

Cumberland Pharmaceuticals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cumberland Pharmaceuticals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Cumberland Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Agilent Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Agilent Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Agilent Technologies is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cumberland Pharmaceuticals and Agilent Technologies

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

The idea behind Cumberland Pharmaceuticals and Agilent Technologies 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.