Correlation Between Cumberland Pharmaceuticals and Kolibri Global

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Kolibri Global

0.49

Correlation Coefficient

Cumberland Pharmaceuticals  Kolibri Global

Very weak diversification

The 3 months correlation between Cumberland and Kolibri is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Kolibri Global Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kolibri Global Energy 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 Kolibri Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kolibri Global Energy has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Kolibri Global go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Kolibri Global

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 10.79 times more return on investment than Kolibri Global. However, Cumberland Pharmaceuticals is 10.79 times more volatile than Kolibri Global Energy. It trades about 0.2 of its potential returns per unit of risk. Kolibri Global Energy is currently generating about 0.91 per unit of risk. If you would invest  118.00  in Cumberland Pharmaceuticals on September 14, 2024 and sell it today you would earn a total of  100.00  from holding Cumberland Pharmaceuticals or generate 84.75% 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.  Kolibri Global Energy

Cumberland Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cumberland Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain forward indicators, Cumberland Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Kolibri Global Energy

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kolibri Global Energy are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating technical and fundamental indicators, Kolibri Global demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cumberland Pharmaceuticals and Kolibri Global

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

The idea behind Cumberland Pharmaceuticals and Kolibri Global Energy 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.