Correlation Between Caterpillar and Acorda Therapeutics

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

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

Diversification Opportunities for Caterpillar and Acorda Therapeutics

0.0

Correlation Coefficient

Caterpillar  Acorda Therapeutics

Pay attention - limited upside

The 3 months correlation between Caterpillar and Acorda is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Caterpillar and Acorda Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acorda Therapeutics and Caterpillar 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 Caterpillar are associated (or correlated) with Acorda Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acorda Therapeutics has no effect on the direction of Caterpillar i.e., Caterpillar and Acorda Therapeutics go up and down completely randomly.

Pair Corralation between Caterpillar and Acorda Therapeutics

If you would invest (100.00) in Acorda Therapeutics on December 21, 2024 and sell it today you would earn a total of  100.00  from holding Acorda Therapeutics or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Caterpillar  vs.  Acorda Therapeutics

Caterpillar

Risk-Adjusted Performance

Very Weak

Over the last 90 days Caterpillar has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Acorda Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Acorda Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Acorda Therapeutics is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Caterpillar and Acorda Therapeutics

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

The idea behind Caterpillar and Acorda Therapeutics 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..