Correlation Between Xenetic Biosciences and ProPhase Labs

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

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

Diversification Opportunities for Xenetic Biosciences and ProPhase Labs

-0.33

Correlation Coefficient

Xenetic Biosciences  ProPhase Labs

Very good diversification

The 3 months correlation between Xenetic and ProPhase is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Xenetic Biosciences and ProPhase Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPhase Labs and Xenetic Biosciences 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 Xenetic Biosciences are associated (or correlated) with ProPhase Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPhase Labs has no effect on the direction of Xenetic Biosciences i.e., Xenetic Biosciences and ProPhase Labs go up and down completely randomly.

Pair Corralation between Xenetic Biosciences and ProPhase Labs

Given the investment horizon of 90 days Xenetic Biosciences is expected to generate 0.86 times more return on investment than ProPhase Labs. However, Xenetic Biosciences is 1.16 times less risky than ProPhase Labs. It trades about 0.04 of its potential returns per unit of risk. ProPhase Labs is currently generating about -0.11 per unit of risk. If you would invest  353.00  in Xenetic Biosciences on September 28, 2024 and sell it today you would earn a total of  62.00  from holding Xenetic Biosciences or generate 17.56% return on investment over 90 days.

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

Xenetic Biosciences  vs.  ProPhase Labs

Xenetic Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Xenetic Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Xenetic Biosciences is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ProPhase Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProPhase Labs has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Xenetic Biosciences and ProPhase Labs

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

The idea behind Xenetic Biosciences and ProPhase Labs 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.