Correlation Between Cumberland Pharmaceuticals and BC Craft

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and BC Craft

-0.8

Correlation Coefficient

Cumberland Pharmaceuticals  BC Craft

Pay attention - limited upside

The 3 months correlation between Cumberland and CRFTF is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and BC Craft Supply in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BC Craft Supply 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 BC Craft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BC Craft Supply has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and BC Craft go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and BC Craft

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 1.03 times more return on investment than BC Craft. However, Cumberland Pharmaceuticals is 1.03 times more volatile than BC Craft Supply. It trades about 0.11 of its potential returns per unit of risk. BC Craft Supply is currently generating about -0.15 per unit of risk. If you would invest  132.00  in Cumberland Pharmaceuticals on October 8, 2024 and sell it today you would earn a total of  98.00  from holding Cumberland Pharmaceuticals or generate 74.24% return on investment over 90 days.

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

Cumberland Pharmaceuticals  vs.  BC Craft Supply

Cumberland Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cumberland Pharmaceuticals are ranked lower than 8 (%) 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.

BC Craft Supply

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BC Craft Supply has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cumberland Pharmaceuticals and BC Craft

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

The idea behind Cumberland Pharmaceuticals and BC Craft Supply 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.