Correlation Between Alpha Teknova and Collegium Pharmaceutical

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

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

Diversification Opportunities for Alpha Teknova and Collegium Pharmaceutical

0.14

Correlation Coefficient

Alpha Teknova  Collegium Pharmaceutical

Average diversification

The 3 months correlation between Alpha and Collegium is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Teknova and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Alpha Teknova 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 Alpha Teknova 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 Alpha Teknova i.e., Alpha Teknova and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Alpha Teknova and Collegium Pharmaceutical

Given the investment horizon of 90 days Alpha Teknova is expected to generate 2.66 times more return on investment than Collegium Pharmaceutical. However, Alpha Teknova is 2.66 times more volatile than Collegium Pharmaceutical. It trades about 0.04 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.02 per unit of risk. If you would invest  542.00  in Alpha Teknova on November 19, 2024 and sell it today you would earn a total of  286.00  from holding Alpha Teknova or generate 52.77% return on investment over 90 days.

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

Alpha Teknova  vs.  Collegium Pharmaceutical

Alpha Teknova

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Teknova are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Alpha Teknova displayed solid returns over the last few months and may actually be approaching a breakup point.

Collegium Pharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Collegium Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. 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 Alpha Teknova and Collegium Pharmaceutical

The main advantage of trading using opposite Alpha Teknova and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alpha Teknova 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 Alpha Teknova 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.