Correlation Between Amphastar and Collegium Pharmaceutical

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

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

Diversification Opportunities for Amphastar and Collegium Pharmaceutical

-0.6

Correlation Coefficient

Amphastar  Collegium Pharmaceutical

Excellent diversification

The 3 months correlation between Amphastar and Collegium is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Amphastar P and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Amphastar 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 Amphastar P 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 Amphastar i.e., Amphastar and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Amphastar and Collegium Pharmaceutical

Given the investment horizon of 90 days Amphastar P is expected to generate 1.02 times more return on investment than Collegium Pharmaceutical. However, Amphastar is 1.02 times more volatile than Collegium Pharmaceutical. It trades about 0.11 of its potential returns per unit of risk. Collegium Pharmaceutical is currently generating about -0.14 per unit of risk. If you would invest  4,105  in Amphastar P on February 8, 2024 and sell it today you would earn a total of  172.00  from holding Amphastar P or generate 4.19% return on investment over 90 days.

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

Amphastar P  vs.  Collegium Pharmaceutical

Amphastar P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amphastar P has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Collegium Pharmaceutical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Collegium Pharmaceutical are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady essential indicators, Collegium Pharmaceutical disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Amphastar and Collegium Pharmaceutical

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

Check out your portfolio center.

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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.