Correlation Between Kala Pharmaceuticals and Acorda Therapeutics

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

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

Diversification Opportunities for Kala Pharmaceuticals and Acorda Therapeutics

0.25

Correlation Coefficient

Kala Pharmaceuticals  Acorda Therapeutics

Modest diversification

The 3 months correlation between Kala and Acorda is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Kala Pharmaceuticals and Acorda Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acorda Therapeutics and Kala Pharmaceuticals 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 Kala Pharmaceuticals 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 Kala Pharmaceuticals i.e., Kala Pharmaceuticals and Acorda Therapeutics go up and down completely randomly.

Pair Corralation between Kala Pharmaceuticals and Acorda Therapeutics

If you would invest  683.00  in Kala Pharmaceuticals on September 3, 2024 and sell it today you would lose (11.00) from holding Kala Pharmaceuticals or give up 1.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.8%
Values	Daily Returns

Kala Pharmaceuticals  vs.  Acorda Therapeutics

Kala Pharmaceuticals

Risk-Adjusted Performance

6 of 100

Modest

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

Acorda Therapeutics

Risk-Adjusted Performance

0 of 100

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 Kala Pharmaceuticals and Acorda Therapeutics

The main advantage of trading using opposite Kala Pharmaceuticals and Acorda Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kala Pharmaceuticals 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 Kala Pharmaceuticals 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.