Correlation Between Kineta and Collegium Pharmaceutical

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

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

Diversification Opportunities for Kineta and Collegium Pharmaceutical

0.12

Correlation Coefficient

Kineta  Collegium Pharmaceutical

Average diversification

The 3 months correlation between Kineta and Collegium is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Kineta Inc and Collegium Pharmaceutical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Collegium Pharmaceutical and Kineta 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 Kineta 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 Kineta i.e., Kineta and Collegium Pharmaceutical go up and down completely randomly.

Pair Corralation between Kineta and Collegium Pharmaceutical

Allowing for the 90-day total investment horizon Kineta Inc is expected to under-perform the Collegium Pharmaceutical. In addition to that, Kineta is 3.22 times more volatile than Collegium Pharmaceutical. It trades about -0.09 of its total potential returns per unit of risk. Collegium Pharmaceutical is currently generating about -0.04 per unit of volatility. If you would invest  3,703  in Collegium Pharmaceutical on March 4, 2024 and sell it today you would lose (389.00) from holding Collegium Pharmaceutical or give up 10.5% of portfolio value over 90 days.

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

Kineta Inc  vs.  Collegium Pharmaceutical

Kineta Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kineta Inc 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 basic indicators remain somewhat strong which may send shares a bit higher in July 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

Very Weak

Over the last 90 days Collegium Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's essential indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Kineta and Collegium Pharmaceutical

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

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.