Correlation Between DiaMedica Therapeutics and Ardelyx

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

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

Diversification Opportunities for DiaMedica Therapeutics and Ardelyx

0.43

Correlation Coefficient

DiaMedica Therapeutics  Ardelyx

Very weak diversification

The 3 months correlation between DiaMedica and Ardelyx is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding DiaMedica Therapeutics and Ardelyx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardelyx and DiaMedica Therapeutics 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 DiaMedica Therapeutics are associated (or correlated) with Ardelyx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardelyx has no effect on the direction of DiaMedica Therapeutics i.e., DiaMedica Therapeutics and Ardelyx go up and down completely randomly.

Pair Corralation between DiaMedica Therapeutics and Ardelyx

Given the investment horizon of 90 days DiaMedica Therapeutics is expected to under-perform the Ardelyx. But the stock apears to be less risky and, when comparing its historical volatility, DiaMedica Therapeutics is 1.31 times less risky than Ardelyx. The stock trades about -0.02 of its potential returns per unit of risk. The Ardelyx is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  458.00  in Ardelyx on December 23, 2024 and sell it today you would earn a total of  55.00  from holding Ardelyx or generate 12.01% return on investment over 90 days.

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

DiaMedica Therapeutics  vs.  Ardelyx

DiaMedica Therapeutics

Risk-Adjusted Performance

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 rather sound basic indicators, DiaMedica Therapeutics is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Ardelyx

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Ardelyx are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Ardelyx showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DiaMedica Therapeutics and Ardelyx

The main advantage of trading using opposite DiaMedica Therapeutics and Ardelyx positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DiaMedica Therapeutics position performs unexpectedly, Ardelyx 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 Ardelyx will offset losses from the drop in Ardelyx's long position.

The idea behind DiaMedica Therapeutics and Ardelyx 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.