Correlation Between Cumberland Pharmaceuticals and Procaps Group

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Procaps Group

0.66

Correlation Coefficient

Cumberland Pharmaceuticals  Procaps Group

Poor diversification

The 3 months correlation between Cumberland and Procaps is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Procaps Group SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procaps Group SA 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 Procaps Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procaps Group SA has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Procaps Group go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Procaps Group

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 12.55 times less return on investment than Procaps Group. But when comparing it to its historical volatility, Cumberland Pharmaceuticals is 4.29 times less risky than Procaps Group. It trades about 0.02 of its potential returns per unit of risk. Procaps Group SA is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  197.00  in Procaps Group SA on August 30, 2024 and sell it today you would earn a total of  12.00  from holding Procaps Group SA or generate 6.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Cumberland Pharmaceuticals  vs.  Procaps Group SA

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 newest stock price disturbance, may contribute to short-term losses for the investors.

Procaps Group SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Procaps Group SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Procaps Group exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cumberland Pharmaceuticals and Procaps Group

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

The idea behind Cumberland Pharmaceuticals and Procaps Group SA 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.