Correlation Between Fortrea Holdings and XOMA

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

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

Diversification Opportunities for Fortrea Holdings and XOMA

-0.38

Correlation Coefficient

Fortrea Holdings  XOMA

Very good diversification

The 3 months correlation between Fortrea and XOMA is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Fortrea Holdings and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA and Fortrea Holdings 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 Fortrea Holdings 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 Fortrea Holdings i.e., Fortrea Holdings and XOMA go up and down completely randomly.

Pair Corralation between Fortrea Holdings and XOMA

Given the investment horizon of 90 days Fortrea Holdings is expected to under-perform the XOMA. In addition to that, Fortrea Holdings is 7.59 times more volatile than XOMA Corporation. It trades about -0.03 of its total potential returns per unit of risk. XOMA Corporation is currently generating about 0.11 per unit of volatility. If you would invest  2,210  in XOMA Corporation on October 9, 2024 and sell it today you would earn a total of  324.00  from holding XOMA Corporation or generate 14.66% return on investment over 90 days.

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

Fortrea Holdings  vs.  XOMA Corp.

Fortrea Holdings

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortrea Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Fortrea Holdings may actually be approaching a critical reversion point that can send shares even higher in February 2025.

XOMA

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 8 (%) 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 Fortrea Holdings and XOMA

The main advantage of trading using opposite Fortrea Holdings and XOMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortrea Holdings 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 Fortrea Holdings 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.