U.S. Markets closed

Should You Be Concerned About Acorda Therapeutics, Inc.'s (NASDAQ:ACOR) Historical Volatility?

Simply Wall St

If you're interested in Acorda Therapeutics, Inc. (NASDAQ:ACOR), then you might want to consider its beta (a measure of share price volatility) in order to understand how the stock could impact your portfolio. Volatility is considered to be a measure of risk in modern finance theory. Investors may think of volatility as falling into two main categories. The first type is company specific volatility. Investors use diversification across uncorrelated stocks to reduce this kind of price volatility across the portfolio. The second type is the broader market volatility, which you cannot diversify away, since it arises from macroeconomic factors which directly affects all the stocks on the market.

Some stocks see their prices move in concert with the market. Others tend towards stronger, gentler or unrelated price movements. Some investors use beta as a measure of how much a certain stock is impacted by market risk (volatility). While we should keep in mind that Warren Buffett has cautioned that 'Volatility is far from synonymous with risk', beta is still a useful factor to consider. To make good use of it you must first know that the beta of the overall market is one. A stock with a beta below one is either less volatile than the market, or more volatile but not corellated with the overall market. In comparison a stock with a beta of over one tends to be move in a similar direction to the market in the long term, but with greater changes in price.

View our latest analysis for Acorda Therapeutics

What we can learn from ACOR's beta value

Given that it has a beta of 1.48, we can surmise that the Acorda Therapeutics share price has been fairly sensitive to market volatility (over the last 5 years). If this beta value holds true in the future, Acorda Therapeutics shares are likely to rise more than the market when the market is going up, but fall faster when the market is going down. Share price volatility is well worth considering, but most long term investors consider the history of revenue and earnings growth to be more important. Take a look at how Acorda Therapeutics fares in that regard, below.

NasdaqGS:ACOR Income Statement, April 22nd 2019

Does ACOR's size influence the expected beta?

Acorda Therapeutics is a small company, but not tiny and little known. It has a market capitalisation of US$531m, which means it would be on the radar of intstitutional investors. It has a relatively high beta, which is not unusual among small-cap stocks. Because it takes less capital to move the share price of a smaller company, actively traded small-cap stocks often have a higher beta that a similar large-cap stock.

What this means for you:

Since Acorda Therapeutics tends to moves up when the market is going up, and down when it's going down, potential investors may wish to reflect on the overall market, when considering the stock. In order to fully understand whether ACOR is a good investment for you, we also need to consider important company-specific fundamentals such as Acorda Therapeutics’s financial health and performance track record. I urge you to continue your research by taking a look at the following:

  1. Future Outlook: What are well-informed industry analysts predicting for ACOR’s future growth? Take a look at our free research report of analyst consensus for ACOR’s outlook.
  2. Past Track Record: Has ACOR been consistently performing well irrespective of the ups and downs in the market? Go into more detail in the past performance analysis and take a look at the free visual representations of ACOR's historicals for more clarity.
  3. Other Interesting Stocks: It's worth checking to see how ACOR measures up against other companies on valuation. You could start with this free list of prospective options.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.