Correlation Between Cumberland Pharmaceuticals and Allkem

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Allkem

0.0

Correlation Coefficient

Cumberland Pharmaceuticals  Allkem

Pay attention - limited upside

The 3 months correlation between Cumberland and Allkem is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Allkem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allkem 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 Allkem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allkem has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Allkem go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Allkem

If you would invest  242.00  in Cumberland Pharmaceuticals on December 30, 2024 and sell it today you would earn a total of  199.00  from holding Cumberland Pharmaceuticals or generate 82.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Cumberland Pharmaceuticals  vs.  Allkem

Cumberland Pharmaceuticals

Risk-Adjusted Performance

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.

Allkem

Risk-Adjusted Performance

Very Weak

Over the last 90 days Allkem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Allkem is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Cumberland Pharmaceuticals and Allkem

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

The idea behind Cumberland Pharmaceuticals and Allkem 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.