Correlation Between KKR Co and Collegium Pharmaceutical

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

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

Diversification Opportunities for KKR Co and Collegium Pharmaceutical

0.58

Correlation Coefficient

KKR Co  Collegium Pharmaceutical

Very weak diversification

The 3 months correlation between KKR and Collegium is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding KKR Co LP and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and KKR Co 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 KKR Co LP 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 KKR Co i.e., KKR Co and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between KKR Co and Collegium Pharmaceutical

Considering the 90-day investment horizon KKR Co LP is expected to under-perform the Collegium Pharmaceutical. In addition to that, KKR Co is 1.1 times more volatile than Collegium Pharmaceutical. It trades about -0.13 of its total potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.03 per unit of volatility. 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

KKR Co LP  vs.  Collegium Pharmaceutical

KKR Co LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days KKR Co LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with fragile performance in the last few months, the Stock's forward-looking signals remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing 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 KKR Co and Collegium Pharmaceutical

The main advantage of trading using opposite KKR Co and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KKR Co 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 KKR Co LP 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.