Correlation Between DiaMedica Therapeutics and Rani Therapeutics

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

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

Diversification Opportunities for DiaMedica Therapeutics and Rani Therapeutics

-0.51

Correlation Coefficient

DiaMedica Therapeutics  Rani Therapeutics

Excellent diversification

The 3 months correlation between DiaMedica and Rani is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding DiaMedica Therapeutics and Rani Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rani Therapeutics 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 Rani Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rani Therapeutics has no effect on the direction of DiaMedica Therapeutics i.e., DiaMedica Therapeutics and Rani Therapeutics go up and down completely randomly.

Pair Corralation between DiaMedica Therapeutics and Rani Therapeutics

Given the investment horizon of 90 days DiaMedica Therapeutics is expected to generate 0.77 times more return on investment than Rani Therapeutics. However, DiaMedica Therapeutics is 1.3 times less risky than Rani Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Rani Therapeutics Holdings is currently generating about -0.01 per unit of risk. If you would invest  154.00  in DiaMedica Therapeutics on September 12, 2024 and sell it today you would earn a total of  362.00  from holding DiaMedica Therapeutics or generate 235.06% return on investment over 90 days.

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

DiaMedica Therapeutics  vs.  Rani Therapeutics Holdings

DiaMedica Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DiaMedica Therapeutics are ranked lower than 7 (%) 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.

Rani Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rani Therapeutics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Rani Therapeutics is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with DiaMedica Therapeutics and Rani Therapeutics

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

The idea behind DiaMedica Therapeutics and Rani Therapeutics Holdings 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.