Correlation Between Malaga Financial and Collegium Pharmaceutical

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

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

Diversification Opportunities for Malaga Financial and Collegium Pharmaceutical

-0.32

Correlation Coefficient

Malaga Financial  Collegium Pharmaceutical

Very good diversification

The 3 months correlation between Malaga and Collegium is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Malaga Financial and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Malaga Financial 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 Malaga Financial 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 Malaga Financial i.e., Malaga Financial and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Malaga Financial and Collegium Pharmaceutical

Given the investment horizon of 90 days Malaga Financial is expected to generate 2.28 times more return on investment than Collegium Pharmaceutical. However, Malaga Financial is 2.28 times more volatile than Collegium Pharmaceutical. It trades about 0.02 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.03 per unit of risk. If you would invest  2,277  in Malaga Financial on October 20, 2024 and sell it today you would lose (147.00) from holding Malaga Financial or give up 6.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.22%
Values	Daily Returns

Malaga Financial  vs.  Collegium Pharmaceutical

Malaga Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Malaga Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Malaga Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 latest unsteady performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Malaga Financial and Collegium Pharmaceutical

The main advantage of trading using opposite Malaga Financial and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Malaga Financial 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 Malaga Financial 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.