Correlation Between Fortress Biotech and XOMA Corp

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

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

Diversification Opportunities for Fortress Biotech and XOMA Corp

-0.42

Correlation Coefficient

Fortress Biotech  XOMA Corp

Very good diversification

The 3 months correlation between Fortress and XOMA is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech Pref and XOMA Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA Corp and Fortress Biotech 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 Fortress Biotech Pref are associated (or correlated) with XOMA Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XOMA Corp has no effect on the direction of Fortress Biotech i.e., Fortress Biotech and XOMA Corp go up and down completely randomly.

Pair Corralation between Fortress Biotech and XOMA Corp

Assuming the 90 days horizon Fortress Biotech Pref is expected to under-perform the XOMA Corp. In addition to that, Fortress Biotech is 4.77 times more volatile than XOMA Corp. It trades about -0.02 of its total potential returns per unit of risk. XOMA Corp is currently generating about 0.05 per unit of volatility. If you would invest  2,531  in XOMA Corp on December 29, 2024 and sell it today you would earn a total of  47.00  from holding XOMA Corp or generate 1.86% return on investment over 90 days.

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

Fortress Biotech Pref  vs.  XOMA Corp

Fortress Biotech Pref

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fortress Biotech Pref has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Fortress Biotech is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

XOMA Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, XOMA Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fortress Biotech and XOMA Corp

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

The idea behind Fortress Biotech Pref and XOMA Corp 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.