Correlation Between Cumberland Pharmaceuticals and Icon Energy

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Icon Energy

0.06

Correlation Coefficient

Cumberland Pharmaceuticals  Icon Energy

Significant diversification

The 3 months correlation between Cumberland and Icon is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Icon Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icon Energy Corp 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 Icon Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icon Energy Corp has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Icon Energy go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Icon Energy

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 0.67 times more return on investment than Icon Energy. However, Cumberland Pharmaceuticals is 1.49 times less risky than Icon Energy. It trades about -0.01 of its potential returns per unit of risk. Icon Energy Corp is currently generating about -0.02 per unit of risk. If you would invest  139.00  in Cumberland Pharmaceuticals on September 5, 2024 and sell it today you would lose (14.00) from holding Cumberland Pharmaceuticals or give up 10.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	81.6%
Values	Daily Returns

Cumberland Pharmaceuticals  vs.  Icon Energy Corp

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.

Icon Energy Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Icon Energy Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Icon Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cumberland Pharmaceuticals and Icon Energy

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

The idea behind Cumberland Pharmaceuticals and Icon Energy Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.