Correlation Between XOMA and Pulmatrix

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

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

Diversification Opportunities for XOMA and Pulmatrix

0.0

Correlation Coefficient

XOMA  Pulmatrix

Pay attention - limited upside

The 3 months correlation between XOMA and Pulmatrix is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Pulmatrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulmatrix 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 Pulmatrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulmatrix has no effect on the direction of XOMA i.e., XOMA and Pulmatrix go up and down completely randomly.

Pair Corralation between XOMA and Pulmatrix

Assuming the 90 days horizon XOMA is expected to generate 40.88 times less return on investment than Pulmatrix. But when comparing it to its historical volatility, XOMA Corporation is 32.26 times less risky than Pulmatrix. It trades about 0.14 of its potential returns per unit of risk. Pulmatrix is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  212.00  in Pulmatrix on September 18, 2024 and sell it today you would earn a total of  363.00  from holding Pulmatrix or generate 171.23% return on investment over 90 days.

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

XOMA Corp.  vs.  Pulmatrix

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.

Pulmatrix

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pulmatrix are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain essential indicators, Pulmatrix displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA and Pulmatrix

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

The idea behind XOMA Corporation and Pulmatrix 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.