Correlation Between Collegium Pharmaceutical and Avadel Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Collegium Pharmaceutical and Avadel 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 Collegium Pharmaceutical and Avadel Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collegium Pharmaceutical and Avadel Pharmaceuticals PLC, you can compare the effects of market volatilities on Collegium Pharmaceutical and Avadel 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 Collegium Pharmaceutical with a short position of Avadel Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collegium Pharmaceutical and Avadel Pharmaceuticals.
Diversification Opportunities for Collegium Pharmaceutical and Avadel Pharmaceuticals
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Collegium and Avadel is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Avadel Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avadel Pharmaceuticals and Collegium Pharmaceutical 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 Collegium Pharmaceutical are associated (or correlated) with Avadel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avadel Pharmaceuticals has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Avadel Pharmaceuticals go up and down completely randomly.
Pair Corralation between Collegium Pharmaceutical and Avadel Pharmaceuticals
Given the investment horizon of 90 days Collegium Pharmaceutical is expected to under-perform the Avadel Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Collegium Pharmaceutical is 2.9 times less risky than Avadel Pharmaceuticals. The stock trades about -0.24 of its potential returns per unit of risk. The Avadel Pharmaceuticals PLC is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,280 in Avadel Pharmaceuticals PLC on August 28, 2024 and sell it today you would lose (158.00) from holding Avadel Pharmaceuticals PLC or give up 12.34% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collegium Pharmaceutical vs. Avadel Pharmaceuticals PLC
Performance |
| Timeline |
| Collegium Pharmaceutical |
| Avadel Pharmaceuticals |
Collegium Pharmaceutical and Avadel Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collegium Pharmaceutical and Avadel Pharmaceuticals
The main advantage of trading using opposite Collegium Pharmaceutical and Avadel Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collegium Pharmaceutical position performs unexpectedly, Avadel 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 Avadel Pharmaceuticals will offset losses from the drop in Avadel Pharmaceuticals' long position.| Collegium Pharmaceutical vs. Phibro Animal Health | Collegium Pharmaceutical vs. ANI Pharmaceuticals | Collegium Pharmaceutical vs. Procaps Group SA | Collegium Pharmaceutical vs. Amphastar P |
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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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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