Correlation Between Franchise and XOMA

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

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

Diversification Opportunities for Franchise and XOMA

0.8

Correlation Coefficient

Franchise  XOMA

Very poor diversification

The 3 months correlation between Franchise and XOMA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Franchise Group and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA and Franchise 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 Franchise Group 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 Franchise i.e., Franchise and XOMA go up and down completely randomly.

Pair Corralation between Franchise and XOMA

If you would invest  2,493  in Franchise Group on September 1, 2024 and sell it today you would earn a total of  0.00  from holding Franchise Group or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	4.76%
Values	Daily Returns

Franchise Group  vs.  XOMA Corp.

Franchise Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Franchise and XOMA

The main advantage of trading using opposite Franchise and XOMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Franchise 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 Franchise Group 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.