Correlation Between Bausch Health and Collegium Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Bausch Health 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 Bausch Health and Collegium Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bausch Health Companies and Collegium Pharmaceutical, you can compare the effects of market volatilities on Bausch Health 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 Bausch Health with a short position of Collegium Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bausch Health and Collegium Pharmaceutical.
Diversification Opportunities for Bausch Health and Collegium Pharmaceutical
-0.36 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Bausch and Collegium is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Bausch Health Companies and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Bausch Health 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 Bausch Health Companies 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 Bausch Health i.e., Bausch Health and Collegium Pharmaceutical go up and down completely randomly.
Pair Corralation between Bausch Health and Collegium Pharmaceutical
Considering the 90-day investment horizon Bausch Health is expected to generate 1.33 times less return on investment than Collegium Pharmaceutical. In addition to that, Bausch Health is 1.23 times more volatile than Collegium Pharmaceutical. It trades about 0.03 of its total potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.05 per unit of volatility. If you would invest 2,194 in Collegium Pharmaceutical on August 31, 2024 and sell it today you would earn a total of 856.00 from holding Collegium Pharmaceutical or generate 39.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Bausch Health Companies vs. Collegium Pharmaceutical
Performance |
| Timeline |
| Bausch Health Companies |
| Collegium Pharmaceutical |
Bausch Health and Collegium Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bausch Health and Collegium Pharmaceutical
The main advantage of trading using opposite Bausch Health and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bausch Health 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 Bausch Health Companies 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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