Correlation Between INC Research and Collegium Pharmaceutical

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

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

Diversification Opportunities for INC Research and Collegium Pharmaceutical

0.43

Correlation Coefficient

INC Research  Collegium Pharmaceutical

Very weak diversification

The 3 months correlation between INC and Collegium is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and INC Research 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 INC Research Holdings 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 INC Research i.e., INC Research and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between INC Research and Collegium Pharmaceutical

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the Collegium Pharmaceutical. But the stock apears to be less risky and, when comparing its historical volatility, INC Research Holdings is 1.19 times less risky than Collegium Pharmaceutical. The stock trades about -0.07 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  2,861  in Collegium Pharmaceutical on December 29, 2024 and sell it today you would earn a total of  95.00  from holding Collegium Pharmaceutical or generate 3.32% return on investment over 90 days.

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

INC Research Holdings  vs.  Collegium Pharmaceutical

INC Research Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

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 INC Research and Collegium Pharmaceutical

The main advantage of trading using opposite INC Research and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if INC Research 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 INC Research Holdings 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.