Correlation Between Cumberland Pharmaceuticals and Origin Materials

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Origin Materials

0.44

Correlation Coefficient

Cumberland Pharmaceuticals  Origin Materials

Very weak diversification

The 3 months correlation between Cumberland and Origin is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Origin Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Materials 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 Origin Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Materials has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Origin Materials go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Origin Materials

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 1.19 times more return on investment than Origin Materials. However, Cumberland Pharmaceuticals is 1.19 times more volatile than Origin Materials. It trades about 0.13 of its potential returns per unit of risk. Origin Materials is currently generating about -0.02 per unit of risk. If you would invest  114.00  in Cumberland Pharmaceuticals on September 4, 2024 and sell it today you would earn a total of  16.00  from holding Cumberland Pharmaceuticals or generate 14.04% return on investment over 90 days.

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

Cumberland Pharmaceuticals  vs.  Origin Materials

Cumberland Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cumberland Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Origin Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Origin Materials has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cumberland Pharmaceuticals and Origin Materials

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

The idea behind Cumberland Pharmaceuticals and Origin Materials 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.