Correlation Between La Jolla and DiaMedica Therapeutics

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Can any of the company-specific risk be diversified away by investing in both La Jolla 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 La Jolla and DiaMedica Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between La Jolla Pharmaceutical and DiaMedica Therapeutics, you can compare the effects of market volatilities on La Jolla 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 La Jolla with a short position of DiaMedica Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of La Jolla and DiaMedica Therapeutics.

Diversification Opportunities for La Jolla and DiaMedica Therapeutics

0.06
  Correlation Coefficient

Significant diversification

The 3 months correlation between LJPC and DiaMedica is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding La Jolla Pharmaceutical and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and La Jolla 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 La Jolla Pharmaceutical 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 La Jolla i.e., La Jolla and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between La Jolla and DiaMedica Therapeutics

If you would invest  622.00  in La Jolla Pharmaceutical on December 29, 2023 and sell it today you would earn a total of  0.00  from holding La Jolla Pharmaceutical or generate 0.0% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy4.55%
ValuesDaily Returns

La Jolla Pharmaceutical  vs.  DiaMedica Therapeutics

 Performance 
       Timeline  
La Jolla Pharmaceutical 

Risk-Adjusted Performance

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

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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.

La Jolla and DiaMedica Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with La Jolla and DiaMedica Therapeutics

The main advantage of trading using opposite La Jolla and DiaMedica Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if La Jolla 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 La Jolla Pharmaceutical 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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