Correlation Between DiaMedica Therapeutics and Editas Medicine

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

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

Diversification Opportunities for DiaMedica Therapeutics and Editas Medicine

0.47

Correlation Coefficient

DiaMedica Therapeutics  Editas Medicine

Very weak diversification

The 3 months correlation between DiaMedica and Editas is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding DiaMedica Therapeutics and Editas Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Editas Medicine 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 Editas Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Editas Medicine has no effect on the direction of DiaMedica Therapeutics i.e., DiaMedica Therapeutics and Editas Medicine go up and down completely randomly.

Pair Corralation between DiaMedica Therapeutics and Editas Medicine

Given the investment horizon of 90 days DiaMedica Therapeutics is expected to under-perform the Editas Medicine. But the stock apears to be less risky and, when comparing its historical volatility, DiaMedica Therapeutics is 3.42 times less risky than Editas Medicine. The stock trades about -0.12 of its potential returns per unit of risk. The Editas Medicine is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  120.00  in Editas Medicine on December 29, 2024 and sell it today you would earn a total of  5.00  from holding Editas Medicine or generate 4.17% 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.  Editas Medicine

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Editas Medicine

Risk-Adjusted Performance

Insignificant

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

Pair Trading with DiaMedica Therapeutics and Editas Medicine

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

The idea behind DiaMedica Therapeutics and Editas Medicine 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 Global Correlations module to find global opportunities by holding instruments from different markets.