Correlation Between Equillium and Collegium Pharmaceutical

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

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

Diversification Opportunities for Equillium and Collegium Pharmaceutical

0.68

Correlation Coefficient

Equillium  Collegium Pharmaceutical

Poor diversification

The 3 months correlation between Equillium and Collegium is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Equillium 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 Equillium 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 Equillium i.e., Equillium and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Equillium and Collegium Pharmaceutical

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.78 times less return on investment than Collegium Pharmaceutical. In addition to that, Equillium is 1.22 times more volatile than Collegium Pharmaceutical. It trades about 0.1 of its total potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.22 per unit of volatility. If you would invest  2,915  in Collegium Pharmaceutical on October 22, 2024 and sell it today you would earn a total of  420.00  from holding Collegium Pharmaceutical or generate 14.41% return on investment over 90 days.

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

Equillium  vs.  Collegium Pharmaceutical

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

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 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 Equillium and Collegium Pharmaceutical

The main advantage of trading using opposite Equillium and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equillium 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 Equillium 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.