Correlation Between Collegium Pharmaceutical and Ecovyst
Can any of the company-specific risk be diversified away by investing in both Collegium Pharmaceutical and Ecovyst 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 Ecovyst into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Collegium Pharmaceutical and Ecovyst, you can compare the effects of market volatilities on Collegium Pharmaceutical and Ecovyst 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 Ecovyst. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collegium Pharmaceutical and Ecovyst.
Diversification Opportunities for Collegium Pharmaceutical and Ecovyst
-0.78 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Collegium and Ecovyst is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Ecovyst in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ecovyst 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 Ecovyst. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ecovyst has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Ecovyst go up and down completely randomly.
Pair Corralation between Collegium Pharmaceutical and Ecovyst
Given the investment horizon of 90 days Collegium Pharmaceutical is expected to under-perform the Ecovyst. But the stock apears to be less risky and, when comparing its historical volatility, Collegium Pharmaceutical is 1.45 times less risky than Ecovyst. The stock trades about -0.21 of its potential returns per unit of risk. The Ecovyst is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest 666.00 in Ecovyst on September 1, 2024 and sell it today you would earn a total of 129.00 from holding Ecovyst or generate 19.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Collegium Pharmaceutical vs. Ecovyst
Performance |
| Timeline |
| Collegium Pharmaceutical |
| Ecovyst |
Collegium Pharmaceutical and Ecovyst Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Collegium Pharmaceutical and Ecovyst
The main advantage of trading using opposite Collegium Pharmaceutical and Ecovyst positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collegium Pharmaceutical position performs unexpectedly, Ecovyst 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 Ecovyst will offset losses from the drop in Ecovyst's long position.The idea behind Collegium Pharmaceutical and Ecovyst 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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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 Stocks Directory module to find actively traded stocks across global markets.
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