Correlation Between Collegium Pharmaceutical and Petróleo Brasileiro

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

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

Diversification Opportunities for Collegium Pharmaceutical and Petróleo Brasileiro

-0.05

Correlation Coefficient

Collegium Pharmaceutical  Petróleo Brasileiro

Good diversification

The 3 months correlation between Collegium and Petróleo is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Petrleo Brasileiro SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petróleo Brasileiro 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 Petróleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petróleo Brasileiro has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Petróleo Brasileiro go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Petróleo Brasileiro

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to under-perform the Petróleo Brasileiro. In addition to that, Collegium Pharmaceutical is 1.54 times more volatile than Petrleo Brasileiro SA. It trades about -0.02 of its total potential returns per unit of risk. Petrleo Brasileiro SA is currently generating about 0.02 per unit of volatility. If you would invest  1,304  in Petrleo Brasileiro SA on November 28, 2024 and sell it today you would earn a total of  13.00  from holding Petrleo Brasileiro SA or generate 1.0% return on investment over 90 days.

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

Collegium Pharmaceutical  vs.  Petrleo Brasileiro SA

Collegium Pharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Collegium Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Petróleo Brasileiro

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Petrleo Brasileiro SA are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Petróleo Brasileiro 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 Petróleo Brasileiro

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

The idea behind Collegium Pharmaceutical and Petrleo Brasileiro SA 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.