Correlation Between HCW Biologics and Cumberland Pharmaceuticals

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

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

Diversification Opportunities for HCW Biologics and Cumberland Pharmaceuticals

0.68

Correlation Coefficient

HCW Biologics  Cumberland Pharmaceuticals

Poor diversification

The 3 months correlation between HCW and Cumberland is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and HCW Biologics 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 HCW Biologics 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 HCW Biologics i.e., HCW Biologics and Cumberland Pharmaceuticals go up and down completely randomly.

Pair Corralation between HCW Biologics and Cumberland Pharmaceuticals

Given the investment horizon of 90 days HCW Biologics is expected to under-perform the Cumberland Pharmaceuticals. In addition to that, HCW Biologics is 1.49 times more volatile than Cumberland Pharmaceuticals. It trades about -0.01 of its total potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about 0.03 per unit of volatility. If you would invest  441.00  in Cumberland Pharmaceuticals on May 6, 2025 and sell it today you would lose (40.00) from holding Cumberland Pharmaceuticals or give up 9.07% of portfolio value over 90 days.

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

HCW Biologics  vs.  Cumberland Pharmaceuticals

HCW Biologics

Risk-Adjusted Performance

Very Weak

Over the last 90 days HCW Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest abnormal performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cumberland Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cumberland Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent forward indicators, Cumberland Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCW Biologics and Cumberland Pharmaceuticals

The main advantage of trading using opposite HCW Biologics and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCW Biologics 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 HCW Biologics 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 Stocks Directory module to find actively traded stocks across global markets.