Correlation Between Cumberland Pharmaceuticals and SFL

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and SFL

-0.27

Correlation Coefficient

Cumberland Pharmaceuticals  SFL

Very good diversification

The 3 months correlation between Cumberland and SFL is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation 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 SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and SFL go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and SFL

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the SFL. In addition to that, Cumberland Pharmaceuticals is 2.32 times more volatile than SFL Corporation. It trades about -0.12 of its total potential returns per unit of risk. SFL Corporation is currently generating about 0.1 per unit of volatility. If you would invest  1,203  in SFL Corporation on January 26, 2024 and sell it today you would earn a total of  100.00  from holding SFL Corporation or generate 8.31% return on investment over 90 days.

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

Cumberland Pharmaceuticals  vs.  SFL Corp.

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 weak 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.

SFL Corporation

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SFL Corporation are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, SFL may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with Cumberland Pharmaceuticals and SFL

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

The idea behind Cumberland Pharmaceuticals and SFL Corporation 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.