Correlation Between XOMA and OFS Credit
Can any of the company-specific risk be diversified away by investing in both XOMA and OFS Credit 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 XOMA and OFS Credit into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XOMA Corporation and OFS Credit, you can compare the effects of market volatilities on XOMA and OFS Credit 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 XOMA with a short position of OFS Credit. Check out your portfolio center. Please also check ongoing floating volatility patterns of XOMA and OFS Credit.
Diversification Opportunities for XOMA and OFS Credit
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between XOMA and OFS is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and OFS Credit in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFS Credit and XOMA 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 XOMA Corporation are associated (or correlated) with OFS Credit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFS Credit has no effect on the direction of XOMA i.e., XOMA and OFS Credit go up and down completely randomly.
Pair Corralation between XOMA and OFS Credit
Assuming the 90 days horizon XOMA Corporation is expected to under-perform the OFS Credit. But the preferred stock apears to be less risky and, when comparing its historical volatility, XOMA Corporation is 2.68 times less risky than OFS Credit. The preferred stock trades about -0.36 of its potential returns per unit of risk. The OFS Credit is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest 2,482 in OFS Credit on August 24, 2024 and sell it today you would lose (8.00) from holding OFS Credit or give up 0.32% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
XOMA Corp. vs. OFS Credit
Performance |
| Timeline |
| XOMA |
| OFS Credit |
XOMA and OFS Credit Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XOMA and OFS Credit
The main advantage of trading using opposite XOMA and OFS Credit positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XOMA position performs unexpectedly, OFS Credit 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 OFS Credit will offset losses from the drop in OFS Credit's long position.The idea behind XOMA Corporation and OFS Credit 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.| OFS Credit vs. Oxford Lane Capital | OFS Credit vs. OFS Credit | OFS Credit vs. XOMA Corporation | OFS Credit vs. HUMANA INC |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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