Correlation Between Redhill Biopharma and Collegium Pharmaceutical
Can any of the company-specific risk be diversified away by investing in both Redhill Biopharma 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 Redhill Biopharma and Collegium Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Redhill Biopharma and Collegium Pharmaceutical, you can compare the effects of market volatilities on Redhill Biopharma 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 Redhill Biopharma with a short position of Collegium Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Redhill Biopharma and Collegium Pharmaceutical.
Diversification Opportunities for Redhill Biopharma and Collegium Pharmaceutical
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Redhill and Collegium is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Redhill Biopharma and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Redhill Biopharma 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 Redhill Biopharma 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 Redhill Biopharma i.e., Redhill Biopharma and Collegium Pharmaceutical go up and down completely randomly.
Pair Corralation between Redhill Biopharma and Collegium Pharmaceutical
Given the investment horizon of 90 days Redhill Biopharma is expected to generate 2.05 times more return on investment than Collegium Pharmaceutical. However, Redhill Biopharma is 2.05 times more volatile than Collegium Pharmaceutical. It trades about -0.03 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about -0.24 per unit of risk. If you would invest 821.00 in Redhill Biopharma on August 28, 2024 and sell it today you would lose (41.00) from holding Redhill Biopharma or give up 4.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Redhill Biopharma vs. Collegium Pharmaceutical
Performance |
| Timeline |
| Redhill Biopharma |
| Collegium Pharmaceutical |
Redhill Biopharma and Collegium Pharmaceutical Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Redhill Biopharma and Collegium Pharmaceutical
The main advantage of trading using opposite Redhill Biopharma and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Redhill Biopharma 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.| Redhill Biopharma vs. Organogenesis Holdings | Redhill Biopharma vs. Lifecore Biomedical | Redhill Biopharma vs. Collegium Pharmaceutical | Redhill Biopharma vs. Aquestive Therapeutics |
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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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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