Correlation Between Collegium Pharmaceutical and Direxion Daily

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

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

Diversification Opportunities for Collegium Pharmaceutical and Direxion Daily

0.92

Correlation Coefficient

Collegium Pharmaceutical  Direxion Daily

Almost no diversification

The 3 months correlation between Collegium and Direxion is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Collegium Pharmaceutical and Direxion Daily FTSE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Direxion Daily FTSE 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 Direxion Daily. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Direxion Daily FTSE has no effect on the direction of Collegium Pharmaceutical i.e., Collegium Pharmaceutical and Direxion Daily go up and down completely randomly.

Pair Corralation between Collegium Pharmaceutical and Direxion Daily

Given the investment horizon of 90 days Collegium Pharmaceutical is expected to under-perform the Direxion Daily. But the stock apears to be less risky and, when comparing its historical volatility, Collegium Pharmaceutical is 1.1 times less risky than Direxion Daily. The stock trades about -0.13 of its potential returns per unit of risk. The Direxion Daily FTSE is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  2,757  in Direxion Daily FTSE on September 1, 2024 and sell it today you would lose (489.00) from holding Direxion Daily FTSE or give up 17.74% of portfolio value over 90 days.

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

Collegium Pharmaceutical  vs.  Direxion Daily FTSE

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 weak 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.

Direxion Daily FTSE

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Direxion Daily FTSE has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Etf's basic 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 ETF venture institutional investors.

Pair Trading with Collegium Pharmaceutical and Direxion Daily

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

The idea behind Collegium Pharmaceutical and Direxion Daily FTSE 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.