Correlation Between Revelation Biosciences and DiaMedica Therapeutics

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

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

Diversification Opportunities for Revelation Biosciences and DiaMedica Therapeutics

-0.07

Correlation Coefficient

Revelation Biosciences  DiaMedica Therapeutics

Good diversification

The 3 months correlation between Revelation and DiaMedica is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Revelation Biosciences and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and Revelation Biosciences 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 Revelation Biosciences 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 Revelation Biosciences i.e., Revelation Biosciences and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between Revelation Biosciences and DiaMedica Therapeutics

Assuming the 90 days horizon Revelation Biosciences is expected to generate 2.38 times more return on investment than DiaMedica Therapeutics. However, Revelation Biosciences is 2.38 times more volatile than DiaMedica Therapeutics. It trades about 0.08 of its potential returns per unit of risk. DiaMedica Therapeutics is currently generating about 0.15 per unit of risk. If you would invest  1.10  in Revelation Biosciences on September 4, 2024 and sell it today you would earn a total of  0.24  from holding Revelation Biosciences or generate 21.82% return on investment over 90 days.

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

Revelation Biosciences  vs.  DiaMedica Therapeutics

Revelation Biosciences

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Revelation Biosciences are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Revelation Biosciences showed solid returns over the last few months and may actually be approaching a breakup point.

DiaMedica Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DiaMedica Therapeutics are ranked lower than 11 (%) 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 Revelation Biosciences and DiaMedica Therapeutics

The main advantage of trading using opposite Revelation Biosciences and DiaMedica Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revelation Biosciences 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 Revelation Biosciences 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.