Correlation Between Kamada and Collegium Pharmaceutical

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

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

Diversification Opportunities for Kamada and Collegium Pharmaceutical

0.27

Correlation Coefficient

Kamada  Collegium Pharmaceutical

Modest diversification

The 3 months correlation between Kamada and Collegium is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Kamada and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Kamada 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 Kamada 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 Kamada i.e., Kamada and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Kamada and Collegium Pharmaceutical

Given the investment horizon of 90 days Kamada is expected to generate 1.22 times more return on investment than Collegium Pharmaceutical. However, Kamada is 1.22 times more volatile than Collegium Pharmaceutical. It trades about 0.09 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.04 per unit of risk. If you would invest  582.00  in Kamada on December 30, 2024 and sell it today you would earn a total of  93.00  from holding Kamada or generate 15.98% return on investment over 90 days.

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

Kamada  vs.  Collegium Pharmaceutical

Kamada

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kamada are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Kamada sustained 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 Kamada and Collegium Pharmaceutical

The main advantage of trading using opposite Kamada and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kamada 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 Kamada 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.