Correlation Between Mallinckrodt Plc and Kala Pharmaceuticals

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

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

Diversification Opportunities for Mallinckrodt Plc and Kala Pharmaceuticals

0.0

Correlation Coefficient

Mallinckrodt Plc  Kala Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Mallinckrodt and Kala is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mallinckrodt Plc and Kala Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kala Pharmaceuticals and Mallinckrodt Plc 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 Mallinckrodt Plc are associated (or correlated) with Kala Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kala Pharmaceuticals has no effect on the direction of Mallinckrodt Plc i.e., Mallinckrodt Plc and Kala Pharmaceuticals go up and down completely randomly.

Pair Corralation between Mallinckrodt Plc and Kala Pharmaceuticals

If you would invest  687.00  in Kala Pharmaceuticals on December 29, 2024 and sell it today you would lose (82.00) from holding Kala Pharmaceuticals or give up 11.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Mallinckrodt Plc  vs.  Kala Pharmaceuticals

Mallinckrodt Plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mallinckrodt Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Mallinckrodt Plc is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Kala Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kala Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Kala Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Mallinckrodt Plc and Kala Pharmaceuticals

The main advantage of trading using opposite Mallinckrodt Plc and Kala Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mallinckrodt Plc position performs unexpectedly, Kala Pharmaceuticals 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 Kala Pharmaceuticals will offset losses from the drop in Kala Pharmaceuticals' long position.

The idea behind Mallinckrodt Plc and Kala Pharmaceuticals 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.