Correlation Between Dyadic International and DiaMedica Therapeutics

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

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

Diversification Opportunities for Dyadic International and DiaMedica Therapeutics

-0.53

Correlation Coefficient

Dyadic International  DiaMedica Therapeutics

Excellent diversification

The 3 months correlation between Dyadic and DiaMedica is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Dyadic International and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and Dyadic International 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 Dyadic International 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 Dyadic International i.e., Dyadic International and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between Dyadic International and DiaMedica Therapeutics

Given the investment horizon of 90 days Dyadic International is expected to generate 0.99 times more return on investment than DiaMedica Therapeutics. However, Dyadic International is 1.01 times less risky than DiaMedica Therapeutics. It trades about -0.09 of its potential returns per unit of risk. DiaMedica Therapeutics is currently generating about -0.1 per unit of risk. If you would invest  164.00  in Dyadic International on January 25, 2024 and sell it today you would lose (15.00) from holding Dyadic International or give up 9.15% of portfolio value over 90 days.

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

Dyadic International  vs.  DiaMedica Therapeutics

Dyadic International

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dyadic International are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, Dyadic International may actually be approaching a critical reversion point that can send shares even higher in May 2024.

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 Dyadic International and DiaMedica Therapeutics

The main advantage of trading using opposite Dyadic International and DiaMedica Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dyadic International 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 Dyadic International 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.