Correlation Between Collegium Pharmaceutical and Charlottes Web

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

By analyzing existing cross correlation between Collegium Pharmaceutical and Charlottes Web Holdings, you can compare the effects of market volatilities on Collegium Pharmaceutical and Charlottes Web 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 Charlottes Web. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collegium Pharmaceutical and Charlottes Web.

Diversification Opportunities for Collegium Pharmaceutical and Charlottes Web

0.17

Correlation Coefficient

Collegium Pharmaceutical  Charlottes Web

Average diversification

The 3 months correlation between Collegium and Charlottes is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Charlottes Web Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charlottes Web Holdings 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 Charlottes Web. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charlottes Web Holdings has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Charlottes Web go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Charlottes Web

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to generate 0.43 times more return on investment than Charlottes Web. However, Collegium Pharmaceutical is 2.33 times less risky than Charlottes Web. It trades about 0.04 of its potential returns per unit of risk. Charlottes Web Holdings is currently generating about -0.02 per unit of risk. If you would invest  2,353  in Collegium Pharmaceutical on August 31, 2024 and sell it today you would earn a total of  718.00  from holding Collegium Pharmaceutical or generate 30.51% return on investment over 90 days.

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

Collegium Pharmaceutical  vs.  Charlottes Web Holdings

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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Charlottes Web Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Charlottes Web Holdings 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 technical indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Collegium Pharmaceutical and Charlottes Web

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

The idea behind Collegium Pharmaceutical and Charlottes Web Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.