Correlation Between Delek Logistics and Cumberland Pharmaceuticals

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

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

Diversification Opportunities for Delek Logistics and Cumberland Pharmaceuticals

0.88

Correlation Coefficient

Delek Logistics  Cumberland Pharmaceuticals

Very poor diversification

The 3 months correlation between Delek and Cumberland is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and Delek Logistics 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 Delek Logistics Partners 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 Delek Logistics i.e., Delek Logistics and Cumberland Pharmaceuticals go up and down completely randomly.

Pair Corralation between Delek Logistics and Cumberland Pharmaceuticals

Considering the 90-day investment horizon Delek Logistics Partners is expected to generate 0.6 times more return on investment than Cumberland Pharmaceuticals. However, Delek Logistics Partners is 1.67 times less risky than Cumberland Pharmaceuticals. It trades about -0.01 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest  4,787  in Delek Logistics Partners on January 26, 2024 and sell it today you would lose (842.00) from holding Delek Logistics Partners or give up 17.59% of portfolio value over 90 days.

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

Delek Logistics Partners  vs.  Cumberland Pharmaceuticals

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's forward-looking signals remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

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.

Pair Trading with Delek Logistics and Cumberland Pharmaceuticals

The main advantage of trading using opposite Delek Logistics and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delek Logistics 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 Delek Logistics Partners 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.