Correlation Between ServisFirst Bancshares and Collegium Pharmaceutical

Can any of the company-specific risk be diversified away by investing in both ServisFirst Bancshares 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 ServisFirst Bancshares and Collegium Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ServisFirst Bancshares and Collegium Pharmaceutical, you can compare the effects of market volatilities on ServisFirst Bancshares 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 ServisFirst Bancshares with a short position of Collegium Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of ServisFirst Bancshares and Collegium Pharmaceutical.

Diversification Opportunities for ServisFirst Bancshares and Collegium Pharmaceutical

0.63

Correlation Coefficient

ServisFirst Bancshares  Collegium Pharmaceutical

Poor diversification

The 3 months correlation between ServisFirst and Collegium is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding ServisFirst Bancshares and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and ServisFirst Bancshares 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 ServisFirst Bancshares 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 ServisFirst Bancshares i.e., ServisFirst Bancshares and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between ServisFirst Bancshares and Collegium Pharmaceutical

Given the investment horizon of 90 days ServisFirst Bancshares is expected to generate 8.69 times less return on investment than Collegium Pharmaceutical. But when comparing it to its historical volatility, ServisFirst Bancshares is 1.41 times less risky than Collegium Pharmaceutical. It trades about 0.03 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  2,907  in Collegium Pharmaceutical on May 14, 2025 and sell it today you would earn a total of  707.00  from holding Collegium Pharmaceutical or generate 24.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

ServisFirst Bancshares  vs.  Collegium Pharmaceutical

ServisFirst Bancshares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ServisFirst Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, ServisFirst Bancshares is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Collegium Pharmaceutical

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Collegium Pharmaceutical are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak essential indicators, Collegium Pharmaceutical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServisFirst Bancshares and Collegium Pharmaceutical

The main advantage of trading using opposite ServisFirst Bancshares and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ServisFirst Bancshares 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.

The idea behind ServisFirst Bancshares and Collegium Pharmaceutical 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.