Correlation Between Collegium Pharmaceutical and Cisco Systems

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

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

Diversification Opportunities for Collegium Pharmaceutical and Cisco Systems

-0.86

Correlation Coefficient

Collegium Pharmaceutical  Cisco Systems

Pay attention - limited upside

The 3 months correlation between Collegium and Cisco is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Cisco Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cisco Systems and Collegium Pharmaceutical 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 Collegium Pharmaceutical are associated (or correlated) with Cisco Systems. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cisco Systems has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Cisco Systems go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Cisco Systems

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to under-perform the Cisco Systems. In addition to that, Collegium Pharmaceutical is 2.11 times more volatile than Cisco Systems. It trades about -0.24 of its total potential returns per unit of risk. Cisco Systems is currently generating about 0.19 per unit of volatility. If you would invest  5,251  in Cisco Systems on October 5, 2024 and sell it today you would earn a total of  659.00  from holding Cisco Systems or generate 12.55% return on investment over 90 days.

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

Collegium Pharmaceutical  vs.  Cisco Systems

Collegium Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collegium Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Cisco Systems

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cisco Systems are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Cisco Systems may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Collegium Pharmaceutical and Cisco Systems

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

The idea behind Collegium Pharmaceutical and Cisco Systems 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.

Check out your portfolio center.

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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.