Correlation Between Acer Therapeutics and ARCA Biopharma

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

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

Diversification Opportunities for Acer Therapeutics and ARCA Biopharma

0.2

Correlation Coefficient

Acer Therapeutics  ARCA Biopharma

Modest diversification

The 3 months correlation between Acer and ARCA is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Acer Therapeutics and ARCA Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Biopharma and Acer Therapeutics 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 Acer Therapeutics are associated (or correlated) with ARCA Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Biopharma has no effect on the direction of Acer Therapeutics i.e., Acer Therapeutics and ARCA Biopharma go up and down completely randomly.

Pair Corralation between Acer Therapeutics and ARCA Biopharma

If you would invest  175.00  in ARCA Biopharma on January 27, 2024 and sell it today you would earn a total of  173.00  from holding ARCA Biopharma or generate 98.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Acer Therapeutics  vs.  ARCA Biopharma

Acer Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

ARCA Biopharma

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ARCA Biopharma are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, ARCA Biopharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acer Therapeutics and ARCA Biopharma

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

The idea behind Acer Therapeutics and ARCA Biopharma 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.