Correlation Between Adagene and XOMA

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

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

Diversification Opportunities for Adagene and XOMA

0.15

Correlation Coefficient

Adagene  XOMA

Average diversification

The 3 months correlation between Adagene and XOMA is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA and Adagene 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 Adagene are associated (or correlated) with XOMA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XOMA has no effect on the direction of Adagene i.e., Adagene and XOMA go up and down completely randomly.

Pair Corralation between Adagene and XOMA

Given the investment horizon of 90 days Adagene is expected to under-perform the XOMA. In addition to that, Adagene is 28.49 times more volatile than XOMA Corporation. It trades about -0.04 of its total potential returns per unit of risk. XOMA Corporation is currently generating about -0.02 per unit of volatility. If you would invest  2,553  in XOMA Corporation on September 15, 2024 and sell it today you would lose (3.00) from holding XOMA Corporation or give up 0.12% of portfolio value over 90 days.

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

Adagene  vs.  XOMA Corp.

Adagene

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

XOMA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 9 (%) 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.

Pair Trading with Adagene and XOMA

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

The idea behind Adagene and XOMA Corporation 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 Transaction History module to view history of all your transactions and understand their impact on performance.