Correlation Between Collegium Pharmaceutical and Aldeyra

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

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

Diversification Opportunities for Collegium Pharmaceutical and Aldeyra

0.61

Correlation Coefficient

Collegium Pharmaceutical  Aldeyra

Poor diversification

The 3 months correlation between Collegium and Aldeyra is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra 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 Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Aldeyra go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Aldeyra

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to under-perform the Aldeyra. But the stock apears to be less risky and, when comparing its historical volatility, Collegium Pharmaceutical is 1.63 times less risky than Aldeyra. The stock trades about -0.12 of its potential returns per unit of risk. The Aldeyra is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  579.00  in Aldeyra on August 31, 2024 and sell it today you would lose (85.00) from holding Aldeyra or give up 14.68% of portfolio value over 90 days.

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

Collegium Pharmaceutical  vs.  Aldeyra

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 uncertain performance in the last few months, the Stock's essential indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aldeyra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aldeyra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Collegium Pharmaceutical and Aldeyra

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

The idea behind Collegium Pharmaceutical and Aldeyra 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.