Correlation Between Dodge Cox and Collegium Pharmaceutical

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

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

Diversification Opportunities for Dodge Cox and Collegium Pharmaceutical

-0.13

Correlation Coefficient

Dodge Cox  Collegium Pharmaceutical

Good diversification

The 3 months correlation between Dodge and Collegium is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Dodge Global Stock and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Dodge Cox 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 Dodge Global Stock are associated (or correlated) with Collegium Pharmaceutical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Collegium Pharmaceutical has no effect on the direction of Dodge Cox i.e., Dodge Cox and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Dodge Cox and Collegium Pharmaceutical

Assuming the 90 days horizon Dodge Global Stock is expected to under-perform the Collegium Pharmaceutical. But the mutual fund apears to be less risky and, when comparing its historical volatility, Dodge Global Stock is 1.47 times less risky than Collegium Pharmaceutical. The mutual fund trades about -0.09 of its potential returns per unit of risk. The Collegium Pharmaceutical is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  3,071  in Collegium Pharmaceutical on November 27, 2024 and sell it today you would lose (189.00) from holding Collegium Pharmaceutical or give up 6.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.31%
Values	Daily Returns

Dodge Global Stock  vs.  Collegium Pharmaceutical

Dodge Global Stock

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dodge Global Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of latest weak performance, the Fund's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the fund investors.

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.

Pair Trading with Dodge Cox and Collegium Pharmaceutical

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

The idea behind Dodge Global Stock and Collegium Pharmaceutical 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.