Correlation Between Collegium Pharmaceutical and Eagle Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Collegium Pharmaceutical and Eagle 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 Eagle 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 Eagle Pharmaceuticals, you can compare the effects of market volatilities on Collegium Pharmaceutical and Eagle 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 Eagle Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Collegium Pharmaceutical and Eagle Pharmaceuticals.

Diversification Opportunities for Collegium Pharmaceutical and Eagle Pharmaceuticals

0.3

Correlation Coefficient

Collegium Pharmaceutical  Eagle Pharmaceuticals

Weak diversification

The 3 months correlation between Collegium and Eagle is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Eagle Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eagle 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 Eagle Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eagle Pharmaceuticals has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Eagle Pharmaceuticals go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Eagle Pharmaceuticals

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to generate 0.44 times more return on investment than Eagle Pharmaceuticals. However, Collegium Pharmaceutical is 2.27 times less risky than Eagle Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Eagle Pharmaceuticals is currently generating about -0.1 per unit of risk. If you would invest  2,325  in Collegium Pharmaceutical on August 15, 2024 and sell it today you would earn a total of  693.00  from holding Collegium Pharmaceutical or generate 29.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	92.49%
Values	Daily Returns

Collegium Pharmaceutical  vs.  Eagle Pharmaceuticals

Collegium Pharmaceutical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Collegium Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Eagle Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Collegium Pharmaceutical and Eagle Pharmaceuticals

The main advantage of trading using opposite Collegium Pharmaceutical and Eagle Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Collegium Pharmaceutical position performs unexpectedly, Eagle 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 Eagle Pharmaceuticals will offset losses from the drop in Eagle Pharmaceuticals' long position.

The idea behind Collegium Pharmaceutical and Eagle Pharmaceuticals 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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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.