Correlation Between Better Therapeutics and XOMA Corp

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

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

Diversification Opportunities for Better Therapeutics and XOMA Corp

0.19

Correlation Coefficient

Better Therapeutics  XOMA Corp

Average diversification

The 3 months correlation between Better and XOMA is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Better Therapeutics and XOMA Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA Corp and Better 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 Better Therapeutics are associated (or correlated) with XOMA Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XOMA Corp has no effect on the direction of Better Therapeutics i.e., Better Therapeutics and XOMA Corp go up and down completely randomly.

Pair Corralation between Better Therapeutics and XOMA Corp

If you would invest  2,904  in XOMA Corp on August 31, 2024 and sell it today you would earn a total of  413.00  from holding XOMA Corp or generate 14.22% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Better Therapeutics  vs.  XOMA Corp

Better Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Better Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Better Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

XOMA Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, XOMA Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Better Therapeutics and XOMA Corp

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

The idea behind Better Therapeutics and XOMA Corp 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.