Correlation Between Cumberland Pharmaceuticals and Griffon

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Griffon

-0.3

Correlation Coefficient

Cumberland Pharmaceuticals  Griffon

Very good diversification

The 3 months correlation between Cumberland and Griffon is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Griffon in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Griffon 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 Griffon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Griffon has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Griffon go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Griffon

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to generate 1.45 times more return on investment than Griffon. However, Cumberland Pharmaceuticals is 1.45 times more volatile than Griffon. It trades about -0.06 of its potential returns per unit of risk. Griffon is currently generating about -0.2 per unit of risk. If you would invest  168.00  in Cumberland Pharmaceuticals on February 1, 2024 and sell it today you would lose (8.00) from holding Cumberland Pharmaceuticals or give up 4.76% of portfolio value over 90 days.

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

Cumberland Pharmaceuticals  vs.  Griffon

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 June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Griffon

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Griffon are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Griffon may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Cumberland Pharmaceuticals and Griffon

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

The idea behind Cumberland Pharmaceuticals and Griffon 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.