Correlation Between XOMA and Histogen

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

By analyzing existing cross correlation between XOMA Corporation and Histogen, you can compare the effects of market volatilities on XOMA and Histogen 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 Histogen. Check out your portfolio center. Please also check ongoing floating volatility patterns of XOMA and Histogen.

Diversification Opportunities for XOMA and Histogen

0.08

Correlation Coefficient

XOMA  Histogen

Significant diversification

The 3 months correlation between XOMA and Histogen is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Histogen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Histogen 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 Histogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Histogen has no effect on the direction of XOMA i.e., XOMA and Histogen go up and down completely randomly.

Pair Corralation between XOMA and Histogen

Assuming the 90 days horizon XOMA Corporation is expected to generate 0.03 times more return on investment than Histogen. However, XOMA Corporation is 38.58 times less risky than Histogen. It trades about 0.14 of its potential returns per unit of risk. Histogen is currently generating about -0.06 per unit of risk. If you would invest  2,477  in XOMA Corporation on September 18, 2024 and sell it today you would earn a total of  82.00  from holding XOMA Corporation or generate 3.31% return on investment over 90 days.

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

XOMA Corp.  vs.  Histogen

XOMA

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, XOMA is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Histogen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Histogen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with XOMA and Histogen

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

The idea behind XOMA Corporation and Histogen 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.