Correlation Between Fortress Transp and Cumberland Pharmaceuticals

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

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

Diversification Opportunities for Fortress Transp and Cumberland Pharmaceuticals

-0.69

Correlation Coefficient

Fortress Transp  Cumberland Pharmaceuticals

Excellent diversification

The 3 months correlation between Fortress and Cumberland is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Transp Infra and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and Fortress Transp 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 Fortress Transp Infra are associated (or correlated) with Cumberland Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cumberland Pharmaceuticals has no effect on the direction of Fortress Transp i.e., Fortress Transp and Cumberland Pharmaceuticals go up and down completely randomly.

Pair Corralation between Fortress Transp and Cumberland Pharmaceuticals

Given the investment horizon of 90 days Fortress Transp Infra is expected to generate 0.69 times more return on investment than Cumberland Pharmaceuticals. However, Fortress Transp Infra is 1.45 times less risky than Cumberland Pharmaceuticals. It trades about 0.22 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about 0.02 per unit of risk. If you would invest  11,771  in Fortress Transp Infra on August 31, 2024 and sell it today you would earn a total of  4,761  from holding Fortress Transp Infra or generate 40.45% return on investment over 90 days.

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

Fortress Transp Infra  vs.  Cumberland Pharmaceuticals

Fortress Transp Infra

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Transp Infra are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Fortress Transp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Fortress Transp and Cumberland Pharmaceuticals

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

The idea behind Fortress Transp Infra and Cumberland Pharmaceuticals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.