Correlation Between DiaMedica Therapeutics and Tscan Therapeutics

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

Diversification Opportunities for DiaMedica Therapeutics and Tscan Therapeutics

0.06

Correlation Coefficient

DiaMedica Therapeutics  Tscan Therapeutics

Significant diversification

The 3 months correlation between DiaMedica and Tscan is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding DiaMedica Therapeutics and Tscan Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tscan 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 Tscan Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tscan Therapeutics has no effect on the direction of DiaMedica Therapeutics i.e., DiaMedica Therapeutics and Tscan Therapeutics go up and down completely randomly.

Pair Corralation between DiaMedica Therapeutics and Tscan Therapeutics

Given the investment horizon of 90 days DiaMedica Therapeutics is expected to generate 0.87 times more return on investment than Tscan Therapeutics. However, DiaMedica Therapeutics is 1.15 times less risky than Tscan Therapeutics. It trades about -0.09 of its potential returns per unit of risk. Tscan Therapeutics is currently generating about -0.28 per unit of risk. If you would invest  534.00  in DiaMedica Therapeutics on December 29, 2024 and sell it today you would lose (120.00) from holding DiaMedica Therapeutics or give up 22.47% of portfolio value over 90 days.

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

DiaMedica Therapeutics  vs.  Tscan Therapeutics

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.

Tscan Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tscan Therapeutics 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 fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with DiaMedica Therapeutics and Tscan Therapeutics

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

The idea behind DiaMedica Therapeutics and Tscan 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.