Correlation Between Cumberland Pharmaceuticals and Neogen

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Neogen

0.88

Correlation Coefficient

Cumberland Pharmaceuticals  Neogen

Very poor diversification

The 3 months correlation between Cumberland and Neogen is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Neogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neogen 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 Neogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neogen has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Neogen go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Neogen

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 1.52 times more return on investment than Neogen. However, Cumberland Pharmaceuticals is 1.52 times more volatile than Neogen. It trades about 0.0 of its potential returns per unit of risk. Neogen is currently generating about -0.21 per unit of risk. If you would invest  185.00  in Cumberland Pharmaceuticals on January 31, 2024 and sell it today you would lose (15.00) from holding Cumberland Pharmaceuticals or give up 8.11% of portfolio value over 90 days.

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

Cumberland Pharmaceuticals  vs.  Neogen

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 unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Neogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Neogen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Cumberland Pharmaceuticals and Neogen

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

The idea behind Cumberland Pharmaceuticals and Neogen 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.