Correlation Between Collegium Pharmaceutical and Decade Resources

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

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

Diversification Opportunities for Collegium Pharmaceutical and Decade Resources

0.47

Correlation Coefficient

Collegium Pharmaceutical  Decade Resources

Very weak diversification

The 3 months correlation between Collegium and Decade is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Decade Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Decade Resources 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 Decade Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Decade Resources has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Decade Resources go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Decade Resources

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to generate 20.5 times less return on investment than Decade Resources. But when comparing it to its historical volatility, Collegium Pharmaceutical is 7.96 times less risky than Decade Resources. It trades about 0.02 of its potential returns per unit of risk. Decade Resources is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  8.50  in Decade Resources on October 5, 2024 and sell it today you would lose (6.92) from holding Decade Resources or give up 81.41% of portfolio value over 90 days.

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

Collegium Pharmaceutical  vs.  Decade Resources

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.

Decade Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decade Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Decade Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Collegium Pharmaceutical and Decade Resources

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

The idea behind Collegium Pharmaceutical and Decade Resources 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.