Correlation Between DiaMedica Therapeutics and Galecto

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

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

Diversification Opportunities for DiaMedica Therapeutics and Galecto

-0.43

Correlation Coefficient

DiaMedica Therapeutics  Galecto

Very good diversification

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

Pair Corralation between DiaMedica Therapeutics and Galecto

Given the investment horizon of 90 days DiaMedica Therapeutics is expected to generate 0.66 times more return on investment than Galecto. However, DiaMedica Therapeutics is 1.53 times less risky than Galecto. It trades about 0.15 of its potential returns per unit of risk. Galecto is currently generating about -0.18 per unit of risk. If you would invest  396.00  in DiaMedica Therapeutics on September 4, 2024 and sell it today you would earn a total of  138.00  from holding DiaMedica Therapeutics or generate 34.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

DiaMedica Therapeutics  vs.  Galecto

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.

Galecto

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Galecto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with DiaMedica Therapeutics and Galecto

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

The idea behind DiaMedica Therapeutics and Galecto 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.