Correlation Between Collegium Pharmaceutical and Enanta Pharmaceuticals

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

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

Diversification Opportunities for Collegium Pharmaceutical and Enanta Pharmaceuticals

-0.66

Correlation Coefficient

Collegium Pharmaceutical  Enanta Pharmaceuticals

Excellent diversification

The 3 months correlation between Collegium and Enanta is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Enanta Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enanta Pharmaceuticals 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 Enanta Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enanta Pharmaceuticals has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Enanta Pharmaceuticals go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Enanta Pharmaceuticals

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to generate 0.49 times more return on investment than Enanta Pharmaceuticals. However, Collegium Pharmaceutical is 2.05 times less risky than Enanta Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Enanta Pharmaceuticals is currently generating about 0.02 per unit of risk. If you would invest  2,861  in Collegium Pharmaceutical on December 30, 2024 and sell it today you would earn a total of  110.00  from holding Collegium Pharmaceutical or generate 3.84% return on investment over 90 days.

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

Collegium Pharmaceutical  vs.  Enanta Pharmaceuticals

Collegium Pharmaceutical

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Collegium Pharmaceutical are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent essential indicators, Collegium Pharmaceutical is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Enanta Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enanta Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Enanta Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Collegium Pharmaceutical and Enanta Pharmaceuticals

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

The idea behind Collegium Pharmaceutical and Enanta 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.