Correlation Between Elanco Animal and Collegium Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Elanco Animal 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 Elanco Animal and Collegium Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Elanco Animal Health and Collegium Pharmaceutical, you can compare the effects of market volatilities on Elanco Animal 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 Elanco Animal with a short position of Collegium Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Elanco Animal and Collegium Pharmaceutical.
Diversification Opportunities for Elanco Animal and Collegium Pharmaceutical
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Elanco and Collegium is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Elanco Animal Health and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Elanco Animal 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 Elanco Animal Health 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 Elanco Animal i.e., Elanco Animal and Collegium Pharmaceutical go up and down completely randomly.
Pair Corralation between Elanco Animal and Collegium Pharmaceutical
Given the investment horizon of 90 days Elanco Animal Health is expected to generate 1.29 times more return on investment than Collegium Pharmaceutical. However, Elanco Animal is 1.29 times more volatile than Collegium Pharmaceutical. It trades about 0.11 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about -0.24 per unit of risk. If you would invest 1,251 in Elanco Animal Health on August 27, 2024 and sell it today you would earn a total of 85.00 from holding Elanco Animal Health or generate 6.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Elanco Animal Health vs. Collegium Pharmaceutical
Performance |
| Timeline |
| Elanco Animal Health |
| Collegium Pharmaceutical |
Elanco Animal and Collegium Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Elanco Animal and Collegium Pharmaceutical
The main advantage of trading using opposite Elanco Animal and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Elanco Animal 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.| Elanco Animal vs. Viatris | Elanco Animal vs. Catalent | Elanco Animal vs. Lantheus Holdings | Elanco Animal vs. Haleon plc |
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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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