Correlation Between Procaps Group and Cumberland Pharmaceuticals

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

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

Diversification Opportunities for Procaps Group and Cumberland Pharmaceuticals

0.47

Correlation Coefficient

Procaps Group  Cumberland Pharmaceuticals

Very weak diversification

The 3 months correlation between Procaps and Cumberland is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Procaps Group SA and Cumberland Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cumberland Pharmaceuticals and Procaps Group 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 Procaps Group SA 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 Procaps Group i.e., Procaps Group and Cumberland Pharmaceuticals go up and down completely randomly.

Pair Corralation between Procaps Group and Cumberland Pharmaceuticals

Given the investment horizon of 90 days Procaps Group SA is expected to under-perform the Cumberland Pharmaceuticals. In addition to that, Procaps Group is 2.05 times more volatile than Cumberland Pharmaceuticals. It trades about -0.06 of its total potential returns per unit of risk. Cumberland Pharmaceuticals is currently generating about -0.12 per unit of volatility. If you would invest  148.00  in Cumberland Pharmaceuticals on July 30, 2024 and sell it today you would lose (26.00) from holding Cumberland Pharmaceuticals or give up 17.57% of portfolio value over 90 days.

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

Procaps Group SA  vs.  Cumberland Pharmaceuticals

Procaps Group SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Procaps Group SA 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 basic indicators remain rather sound which may send shares a bit higher in November 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

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.

Pair Trading with Procaps Group and Cumberland Pharmaceuticals

The main advantage of trading using opposite Procaps Group and Cumberland Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Procaps Group 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 Procaps Group SA 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.