Correlation Between Intercept Pharmaceuticals and DiaMedica Therapeutics

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

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

Diversification Opportunities for Intercept Pharmaceuticals and DiaMedica Therapeutics

-0.43

Correlation Coefficient

Intercept Pharmaceuticals  DiaMedica Therapeutics

Very good diversification

The 3 months correlation between Intercept and DiaMedica is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Intercept Pharmaceuticals and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and Intercept Pharmaceuticals 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 Intercept Pharmaceuticals 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 Intercept Pharmaceuticals i.e., Intercept Pharmaceuticals and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between Intercept Pharmaceuticals and DiaMedica Therapeutics

If you would invest  401.00  in DiaMedica Therapeutics on September 21, 2024 and sell it today you would earn a total of  240.00  from holding DiaMedica Therapeutics or generate 59.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Intercept Pharmaceuticals  vs.  DiaMedica Therapeutics

Intercept Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intercept Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Intercept Pharmaceuticals is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

DiaMedica Therapeutics

Risk-Adjusted Performance

12 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DiaMedica Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, DiaMedica Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Intercept Pharmaceuticals and DiaMedica Therapeutics

The main advantage of trading using opposite Intercept Pharmaceuticals and DiaMedica Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Intercept Pharmaceuticals 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 Intercept Pharmaceuticals 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.