Correlation Between XOMA Corp and CERo Therapeutics
Can any of the company-specific risk be diversified away by investing in both XOMA Corp and CERo 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 XOMA Corp and CERo Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XOMA Corp and CERo Therapeutics Holdings, you can compare the effects of market volatilities on XOMA Corp and CERo 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 XOMA Corp with a short position of CERo Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of XOMA Corp and CERo Therapeutics.
Diversification Opportunities for XOMA Corp and CERo Therapeutics
-0.71 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between XOMA and CERo is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp and CERo Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CERo Therapeutics and XOMA Corp 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 Corp are associated (or correlated) with CERo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CERo Therapeutics has no effect on the direction of XOMA Corp i.e., XOMA Corp and CERo Therapeutics go up and down completely randomly.
Pair Corralation between XOMA Corp and CERo Therapeutics
Assuming the 90 days horizon XOMA Corp is expected to under-perform the CERo Therapeutics. But the preferred stock apears to be less risky and, when comparing its historical volatility, XOMA Corp is 47.71 times less risky than CERo Therapeutics. The preferred stock trades about -0.14 of its potential returns per unit of risk. The CERo Therapeutics Holdings is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 0.60 in CERo Therapeutics Holdings on August 28, 2024 and sell it today you would earn a total of 1.38 from holding CERo Therapeutics Holdings or generate 230.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 90.48% |
| Values | Daily Returns |
XOMA Corp vs. CERo Therapeutics Holdings
Performance |
| Timeline |
| XOMA Corp |
| CERo Therapeutics |
XOMA Corp and CERo Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with XOMA Corp and CERo Therapeutics
The main advantage of trading using opposite XOMA Corp and CERo Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XOMA Corp position performs unexpectedly, CERo 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 CERo Therapeutics will offset losses from the drop in CERo Therapeutics' long position.The idea behind XOMA Corp and CERo 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.| CERo Therapeutics vs. Vivani Medical | CERo Therapeutics vs. Verve Therapeutics | CERo Therapeutics vs. Bright Minds Biosciences | CERo Therapeutics vs. Alpha Tau Medical |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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