Correlation Between Cumberland Pharmaceuticals and Guardion Health

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Guardion Health

-0.2

Correlation Coefficient

Cumberland Pharmaceuticals  Guardion Health

Good diversification

The 3 months correlation between Cumberland and Guardion is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Guardion Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardion Health Sciences 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 Guardion Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardion Health Sciences has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Guardion Health go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Guardion Health

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 0.39 times more return on investment than Guardion Health. However, Cumberland Pharmaceuticals is 2.54 times less risky than Guardion Health. It trades about 0.03 of its potential returns per unit of risk. Guardion Health Sciences is currently generating about -0.05 per unit of risk. If you would invest  135.00  in Cumberland Pharmaceuticals on September 3, 2024 and sell it today you would earn a total of  5.00  from holding Cumberland Pharmaceuticals or generate 3.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	54.69%
Values	Daily Returns

Cumberland Pharmaceuticals  vs.  Guardion Health Sciences

Cumberland Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cumberland Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward indicators, Cumberland Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Guardion Health Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Guardion Health Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Cumberland Pharmaceuticals and Guardion Health

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

The idea behind Cumberland Pharmaceuticals and Guardion Health Sciences 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.