Correlation Between Monopar Therapeutics and DiaMedica Therapeutics

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

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

Diversification Opportunities for Monopar Therapeutics and DiaMedica Therapeutics

0.76

Correlation Coefficient

Monopar Therapeutics  DiaMedica Therapeutics

Poor diversification

The 3 months correlation between Monopar and DiaMedica is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Monopar Therapeutics and DiaMedica Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DiaMedica Therapeutics and Monopar 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 Monopar Therapeutics are associated (or correlated) with DiaMedica Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DiaMedica Therapeutics has no effect on the direction of Monopar Therapeutics i.e., Monopar Therapeutics and DiaMedica Therapeutics go up and down completely randomly.

Pair Corralation between Monopar Therapeutics and DiaMedica Therapeutics

Given the investment horizon of 90 days Monopar Therapeutics is expected to generate 1.56 times more return on investment than DiaMedica Therapeutics. However, Monopar Therapeutics is 1.56 times more volatile than DiaMedica Therapeutics. It trades about 0.13 of its potential returns per unit of risk. DiaMedica Therapeutics is currently generating about 0.09 per unit of risk. If you would invest  2,201  in Monopar Therapeutics on December 1, 2024 and sell it today you would earn a total of  1,310  from holding Monopar Therapeutics or generate 59.52% return on investment over 90 days.

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

Monopar Therapeutics  vs.  DiaMedica Therapeutics

Monopar Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monopar Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Monopar Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

DiaMedica Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in DiaMedica Therapeutics are ranked lower than 6 (%) 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.

Pair Trading with Monopar Therapeutics and DiaMedica Therapeutics

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

The idea behind Monopar Therapeutics and DiaMedica 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.