Correlation Between Cumberland Pharmaceuticals and Universal Technical

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

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

Diversification Opportunities for Cumberland Pharmaceuticals and Universal Technical

0.78

Correlation Coefficient

Cumberland Pharmaceuticals  Universal Technical

Poor diversification

The 3 months correlation between Cumberland and Universal is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Cumberland Pharmaceuticals and Universal Technical Institute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Universal Technical 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 Universal Technical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Universal Technical has no effect on the direction of Cumberland Pharmaceuticals i.e., Cumberland Pharmaceuticals and Universal Technical go up and down completely randomly.

Pair Corralation between Cumberland Pharmaceuticals and Universal Technical

Given the investment horizon of 90 days Cumberland Pharmaceuticals is expected to under-perform the Universal Technical. In addition to that, Cumberland Pharmaceuticals is 1.16 times more volatile than Universal Technical Institute. It trades about -0.12 of its total potential returns per unit of risk. Universal Technical Institute is currently generating about -0.11 per unit of volatility. If you would invest  1,935  in Universal Technical Institute on July 30, 2024 and sell it today you would lose (271.00) from holding Universal Technical Institute or give up 14.01% of portfolio value over 90 days.

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

Cumberland Pharmaceuticals  vs.  Universal Technical Institute

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

Universal Technical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Universal Technical Institute has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Cumberland Pharmaceuticals and Universal Technical

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

The idea behind Cumberland Pharmaceuticals and Universal Technical Institute 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.