Correlation Between Oculis Holding and DiaMedica Therapeutics

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

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

Diversification Opportunities for Oculis Holding and DiaMedica Therapeutics

0.23

Correlation Coefficient

Oculis Holding  DiaMedica Therapeutics

Modest diversification

The 3 months correlation between Oculis and DiaMedica is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Oculis Holding AG and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and Oculis Holding 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 Oculis Holding AG 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 Oculis Holding i.e., Oculis Holding and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between Oculis Holding and DiaMedica Therapeutics

Assuming the 90 days horizon Oculis Holding AG is expected to generate 3.16 times more return on investment than DiaMedica Therapeutics. However, Oculis Holding is 3.16 times more volatile than DiaMedica Therapeutics. It trades about 0.18 of its potential returns per unit of risk. DiaMedica Therapeutics is currently generating about 0.1 per unit of risk. If you would invest  205.00  in Oculis Holding AG on September 12, 2024 and sell it today you would earn a total of  268.00  from holding Oculis Holding AG or generate 130.73% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Oculis Holding AG  vs.  DiaMedica Therapeutics

Oculis Holding AG

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Oculis Holding AG are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Oculis Holding showed solid returns over the last few months and may actually be approaching a breakup point.

DiaMedica Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DiaMedica Therapeutics are ranked lower than 7 (%) 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 Oculis Holding and DiaMedica Therapeutics

The main advantage of trading using opposite Oculis Holding and DiaMedica Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oculis Holding 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 Oculis Holding AG 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.