Correlation Between Intracellular and Collegium Pharmaceutical

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

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

Diversification Opportunities for Intracellular and Collegium Pharmaceutical

-0.82

Correlation Coefficient

Intracellular  Collegium Pharmaceutical

Pay attention - limited upside

The 3 months correlation between Intracellular and Collegium is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Intracellular Th and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Intracellular 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 Intracellular Th 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 Intracellular i.e., Intracellular and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Intracellular and Collegium Pharmaceutical

Given the investment horizon of 90 days Intracellular Th is expected to generate 0.91 times more return on investment than Collegium Pharmaceutical. However, Intracellular Th is 1.1 times less risky than Collegium Pharmaceutical. It trades about 0.14 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about -0.12 per unit of risk. If you would invest  7,300  in Intracellular Th on August 31, 2024 and sell it today you would earn a total of  1,359  from holding Intracellular Th or generate 18.62% return on investment over 90 days.

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

Intracellular Th  vs.  Collegium Pharmaceutical

Intracellular Th

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Intracellular Th are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain fundamental indicators, Intracellular demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Intracellular and Collegium Pharmaceutical

The main advantage of trading using opposite Intracellular and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intracellular 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 Intracellular Th 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.