Correlation Between XOMA and Rezolute
Can any of the company-specific risk be diversified away by investing in both XOMA and Rezolute 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 Rezolute into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XOMA Corporation and Rezolute, you can compare the effects of market volatilities on XOMA and Rezolute 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 Rezolute. Check out your portfolio center. Please also check ongoing floating volatility patterns of XOMA and Rezolute.
Diversification Opportunities for XOMA and Rezolute
Very weak diversification
The 3 months correlation between XOMA and Rezolute is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Rezolute in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rezolute 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 Rezolute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rezolute has no effect on the direction of XOMA i.e., XOMA and Rezolute go up and down completely randomly.
Pair Corralation between XOMA and Rezolute
Assuming the 90 days horizon XOMA Corporation is expected to generate 0.05 times more return on investment than Rezolute. However, XOMA Corporation is 19.4 times less risky than Rezolute. It trades about -0.2 of its potential returns per unit of risk. Rezolute is currently generating about -0.15 per unit of risk. If you would invest 2,556 in XOMA Corporation on August 30, 2024 and sell it today you would lose (20.00) from holding XOMA Corporation or give up 0.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
XOMA Corp. vs. Rezolute
Performance |
| Timeline |
| XOMA |
| Rezolute |
XOMA and Rezolute Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XOMA and Rezolute
The main advantage of trading using opposite XOMA and Rezolute positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XOMA position performs unexpectedly, Rezolute 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 Rezolute will offset losses from the drop in Rezolute's long position.The idea behind XOMA Corporation and Rezolute 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 CEOs Directory module to screen CEOs from public companies around the world.
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