Correlation Between Ryanair Holdings and Cumberland Pharmaceuticals

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

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

Diversification Opportunities for Ryanair Holdings and Cumberland Pharmaceuticals

-0.35

Correlation Coefficient

Ryanair Holdings  Cumberland Pharmaceuticals

Very good diversification

The 3 months correlation between Ryanair and Cumberland is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Ryanair Holdings PLC and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and Ryanair Holdings 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 Ryanair Holdings PLC 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 Ryanair Holdings i.e., Ryanair Holdings and Cumberland Pharmaceuticals go up and down completely randomly.

Pair Corralation between Ryanair Holdings and Cumberland Pharmaceuticals

Assuming the 90 days horizon Ryanair Holdings PLC is expected to generate 0.48 times more return on investment than Cumberland Pharmaceuticals. However, Ryanair Holdings PLC is 2.07 times less risky than Cumberland Pharmaceuticals. It trades about 0.07 of its potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.12 per unit of risk. If you would invest  13,011  in Ryanair Holdings PLC on January 26, 2024 and sell it today you would earn a total of  824.00  from holding Ryanair Holdings PLC or generate 6.33% return on investment over 90 days.

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

Ryanair Holdings PLC  vs.  Cumberland Pharmaceuticals

Ryanair Holdings PLC

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ryanair Holdings PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Ryanair Holdings may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 Ryanair Holdings and Cumberland Pharmaceuticals

The main advantage of trading using opposite Ryanair Holdings and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ryanair Holdings 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 Ryanair Holdings PLC 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.