Correlation Between Nkarta and Collegium Pharmaceutical

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Can any of the company-specific risk be diversified away by investing in both Nkarta 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 Nkarta and Collegium Pharmaceutical into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nkarta Inc and Collegium Pharmaceutical, you can compare the effects of market volatilities on Nkarta 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 Nkarta with a short position of Collegium Pharmaceutical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nkarta and Collegium Pharmaceutical.

Diversification Opportunities for Nkarta and Collegium Pharmaceutical

0.71
  Correlation Coefficient

Poor diversification

The 3 months correlation between Nkarta and Collegium is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Nkarta Inc and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Nkarta 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 Nkarta Inc 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 Nkarta i.e., Nkarta and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Nkarta and Collegium Pharmaceutical

Given the investment horizon of 90 days Nkarta Inc is expected to under-perform the Collegium Pharmaceutical. In addition to that, Nkarta is 2.18 times more volatile than Collegium Pharmaceutical. It trades about -0.15 of its total potential returns per unit of risk. Collegium Pharmaceutical is currently generating about -0.14 per unit of volatility. If you would invest  3,846  in Collegium Pharmaceutical on August 30, 2024 and sell it today you would lose (775.00) from holding Collegium Pharmaceutical or give up 20.15% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Nkarta Inc  vs.  Collegium Pharmaceutical

 Performance 
       Timeline  
Nkarta Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile 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.
Collegium Pharmaceutical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Collegium Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Nkarta and Collegium Pharmaceutical Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nkarta and Collegium Pharmaceutical

The main advantage of trading using opposite Nkarta and Collegium Pharmaceutical positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nkarta 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 Nkarta Inc 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

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