Correlation Between XOMA and Pharmala Biotech

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

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

Diversification Opportunities for XOMA and Pharmala Biotech

-0.04

Correlation Coefficient

XOMA  Pharmala Biotech

Good diversification

The 3 months correlation between XOMA and Pharmala is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Pharmala Biotech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharmala Biotech Holdings 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 Pharmala Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharmala Biotech Holdings has no effect on the direction of XOMA i.e., XOMA and Pharmala Biotech go up and down completely randomly.

Pair Corralation between XOMA and Pharmala Biotech

If you would invest  2,488  in XOMA Corporation on September 3, 2024 and sell it today you would earn a total of  51.00  from holding XOMA Corporation or generate 2.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

XOMA Corp.  vs.  Pharmala Biotech Holdings

XOMA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 6 (%) 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.

Pharmala Biotech Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pharmala Biotech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Pharmala Biotech is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with XOMA and Pharmala Biotech

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

The idea behind XOMA Corporation and Pharmala Biotech 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.

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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.