Correlation Between Sera Prognostics and DiaMedica Therapeutics

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

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

Diversification Opportunities for Sera Prognostics and DiaMedica Therapeutics

-0.45

Correlation Coefficient

Sera Prognostics  DiaMedica Therapeutics

Very good diversification

The 3 months correlation between Sera and DiaMedica is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Sera Prognostics and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and Sera Prognostics 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 Sera Prognostics are associated (or correlated) with DiaMedica Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiaMedica Therapeutics has no effect on the direction of Sera Prognostics i.e., Sera Prognostics and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between Sera Prognostics and DiaMedica Therapeutics

Given the investment horizon of 90 days Sera Prognostics is expected to generate 1.01 times more return on investment than DiaMedica Therapeutics. However, Sera Prognostics is 1.01 times more volatile than DiaMedica Therapeutics. It trades about 0.02 of its potential returns per unit of risk. DiaMedica Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  870.00  in Sera Prognostics on February 28, 2024 and sell it today you would lose (11.00) from holding Sera Prognostics or give up 1.26% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sera Prognostics  vs.  DiaMedica Therapeutics

Sera Prognostics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sera Prognostics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sera Prognostics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

DiaMedica Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DiaMedica Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, DiaMedica Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sera Prognostics and DiaMedica Therapeutics

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

The idea behind Sera Prognostics and DiaMedica 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.