Correlation Between DiaMedica Therapeutics and ATyr Pharma

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

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

Diversification Opportunities for DiaMedica Therapeutics and ATyr Pharma

-0.11

Correlation Coefficient

DiaMedica Therapeutics  ATyr Pharma

Good diversification

The 3 months correlation between DiaMedica and ATyr is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding DiaMedica Therapeutics and aTyr Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on aTyr Pharma and DiaMedica 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 DiaMedica Therapeutics are associated (or correlated) with ATyr Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of aTyr Pharma has no effect on the direction of DiaMedica Therapeutics i.e., DiaMedica Therapeutics and ATyr Pharma go up and down completely randomly.

Pair Corralation between DiaMedica Therapeutics and ATyr Pharma

Given the investment horizon of 90 days DiaMedica Therapeutics is expected to generate 11.59 times less return on investment than ATyr Pharma. But when comparing it to its historical volatility, DiaMedica Therapeutics is 8.86 times less risky than ATyr Pharma. It trades about 0.03 of its potential returns per unit of risk. aTyr Pharma is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  285.00  in aTyr Pharma on March 22, 2024 and sell it today you would lose (86.00) from holding aTyr Pharma or give up 30.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.99%
Values	Daily Returns

DiaMedica Therapeutics  vs.  aTyr Pharma

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 latest unfluctuating performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

aTyr Pharma

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days aTyr Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unfluctuating technical and fundamental indicators, ATyr Pharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DiaMedica Therapeutics and ATyr Pharma

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

The idea behind DiaMedica Therapeutics and aTyr Pharma 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.