Correlation Between Evolus and Collegium Pharmaceutical

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

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

Diversification Opportunities for Evolus and Collegium Pharmaceutical

-0.16

Correlation Coefficient

Evolus  Collegium Pharmaceutical

Good diversification

The 3 months correlation between Evolus and Collegium is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Evolus Inc and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Evolus 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 Evolus Inc 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 Evolus i.e., Evolus and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Evolus and Collegium Pharmaceutical

Given the investment horizon of 90 days Evolus Inc is expected to generate 1.81 times more return on investment than Collegium Pharmaceutical. However, Evolus is 1.81 times more volatile than Collegium Pharmaceutical. It trades about 0.06 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.04 per unit of risk. If you would invest  1,089  in Evolus Inc on December 30, 2024 and sell it today you would earn a total of  116.00  from holding Evolus Inc or generate 10.65% return on investment over 90 days.

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

Evolus Inc  vs.  Collegium Pharmaceutical

Evolus Inc

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Evolus Inc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting essential indicators, Evolus unveiled solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Evolus and Collegium Pharmaceutical

The main advantage of trading using opposite Evolus and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evolus 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 Evolus Inc 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.

Check out your portfolio center.

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.