Correlation Between 3M and Acorda Therapeutics

Can any of the company-specific risk be diversified away by investing in both 3M 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 3M and Acorda Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 3M Company and Acorda Therapeutics, you can compare the effects of market volatilities on 3M 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 3M with a short position of Acorda Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of 3M and Acorda Therapeutics.

Diversification Opportunities for 3M and Acorda Therapeutics

-0.61

Correlation Coefficient

3M  Acorda Therapeutics

Excellent diversification

The 3 months correlation between 3M and Acorda is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding 3M Company and Acorda Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acorda Therapeutics and 3M 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 3M Company 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 3M i.e., 3M and Acorda Therapeutics go up and down completely randomly.

Pair Corralation between 3M and Acorda Therapeutics

If you would invest  9,592  in 3M Company on March 7, 2024 and sell it today you would earn a total of  269.00  from holding 3M Company or generate 2.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	0.0%
Values	Daily Returns

3M Company  vs.  Acorda Therapeutics

3M Company

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in 3M Company are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile primary indicators, 3M displayed 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 weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in July 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with 3M and Acorda Therapeutics

The main advantage of trading using opposite 3M and Acorda Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 3M 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 3M Company 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.