Correlation Between TRACON Pharmaceuticals and DiaMedica Therapeutics

Can any of the company-specific risk be diversified away by investing in both TRACON 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 TRACON 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 TRACON Pharmaceuticals and DiaMedica Therapeutics, you can compare the effects of market volatilities on TRACON 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 TRACON Pharmaceuticals with a short position of DiaMedica Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of TRACON Pharmaceuticals and DiaMedica Therapeutics.

Diversification Opportunities for TRACON Pharmaceuticals and DiaMedica Therapeutics

-0.49

Correlation Coefficient

TRACON Pharmaceuticals  DiaMedica Therapeutics

Very good diversification

The 3 months correlation between TRACON and DiaMedica is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding TRACON Pharmaceuticals and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and TRACON 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 TRACON 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 TRACON Pharmaceuticals i.e., TRACON Pharmaceuticals and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between TRACON Pharmaceuticals and DiaMedica Therapeutics

If you would invest  389.00  in DiaMedica Therapeutics on August 31, 2024 and sell it today you would earn a total of  132.00  from holding DiaMedica Therapeutics or generate 33.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.59%
Values	Daily Returns

TRACON Pharmaceuticals  vs.  DiaMedica Therapeutics

TRACON Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TRACON Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, TRACON Pharmaceuticals is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

DiaMedica Therapeutics

Risk-Adjusted Performance

12 of 100

Good

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 TRACON Pharmaceuticals and DiaMedica Therapeutics

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

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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.