Correlation Between Dynavax Technologies and DiaMedica Therapeutics

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

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

Diversification Opportunities for Dynavax Technologies and DiaMedica Therapeutics

0.21

Correlation Coefficient

Dynavax Technologies  DiaMedica Therapeutics

Modest diversification

The 3 months correlation between Dynavax and DiaMedica is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dynavax Technologies and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and Dynavax Technologies 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 Dynavax Technologies 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 Dynavax Technologies i.e., Dynavax Technologies and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between Dynavax Technologies and DiaMedica Therapeutics

Given the investment horizon of 90 days Dynavax Technologies is expected to generate 0.26 times more return on investment than DiaMedica Therapeutics. However, Dynavax Technologies is 3.81 times less risky than DiaMedica Therapeutics. It trades about -0.3 of its potential returns per unit of risk. DiaMedica Therapeutics is currently generating about -0.11 per unit of risk. If you would invest  1,210  in Dynavax Technologies on January 20, 2024 and sell it today you would lose (76.00) from holding Dynavax Technologies or give up 6.28% of portfolio value over 90 days.

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

Dynavax Technologies  vs.  DiaMedica Therapeutics

Dynavax Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dynavax Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company 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 latest uncertain 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.

Pair Trading with Dynavax Technologies and DiaMedica Therapeutics

The main advantage of trading using opposite Dynavax Technologies and DiaMedica Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynavax Technologies 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 Dynavax Technologies 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.