Correlation Between XOMA and Lixte Biotechnology

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

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

Diversification Opportunities for XOMA and Lixte Biotechnology

-0.17

Correlation Coefficient

XOMA  Lixte Biotechnology

Good diversification

The 3 months correlation between XOMA and Lixte is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Lixte Biotechnology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lixte Biotechnology 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 Lixte Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lixte Biotechnology has no effect on the direction of XOMA i.e., XOMA and Lixte Biotechnology go up and down completely randomly.

Pair Corralation between XOMA and Lixte Biotechnology

Assuming the 90 days horizon XOMA is expected to generate 6.85 times less return on investment than Lixte Biotechnology. But when comparing it to its historical volatility, XOMA Corporation is 25.46 times less risky than Lixte Biotechnology. It trades about 0.14 of its potential returns per unit of risk. Lixte Biotechnology Holdings is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  200.00  in Lixte Biotechnology Holdings on September 18, 2024 and sell it today you would lose (1.00) from holding Lixte Biotechnology Holdings or give up 0.5% of portfolio value over 90 days.

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

XOMA Corp.  vs.  Lixte Biotechnology Holdings

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.

Lixte Biotechnology

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lixte Biotechnology Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Lixte Biotechnology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA and Lixte Biotechnology

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

The idea behind XOMA Corporation and Lixte Biotechnology 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.

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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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.