Correlation Between Collegium Pharmaceutical and Trinseo SA

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

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

Diversification Opportunities for Collegium Pharmaceutical and Trinseo SA

0.58

Correlation Coefficient

Collegium Pharmaceutical  Trinseo SA

Very weak diversification

The 3 months correlation between Collegium and Trinseo is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Trinseo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Trinseo SA 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 Trinseo SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Trinseo SA has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Trinseo SA go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Trinseo SA

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to under-perform the Trinseo SA. But the stock apears to be less risky and, when comparing its historical volatility, Collegium Pharmaceutical is 3.66 times less risky than Trinseo SA. The stock trades about -0.24 of its potential returns per unit of risk. The Trinseo SA is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  640.00  in Trinseo SA on October 5, 2024 and sell it today you would lose (123.00) from holding Trinseo SA or give up 19.22% 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.  Trinseo SA

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.

Trinseo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Trinseo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Trinseo SA is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Collegium Pharmaceutical and Trinseo SA

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

The idea behind Collegium Pharmaceutical and Trinseo 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.