Correlation Between Institute and XOMA

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

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

Diversification Opportunities for Institute and XOMA

-0.24

Correlation Coefficient

Institute  XOMA

Very good diversification

The 3 months correlation between Institute and XOMA is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Institute of Biomedical and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA and Institute 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 Institute of Biomedical 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 Institute i.e., Institute and XOMA go up and down completely randomly.

Pair Corralation between Institute and XOMA

Given the investment horizon of 90 days Institute of Biomedical is expected to generate 12.65 times more return on investment than XOMA. However, Institute is 12.65 times more volatile than XOMA Corporation. It trades about 0.03 of its potential returns per unit of risk. XOMA Corporation is currently generating about 0.06 per unit of risk. If you would invest  1.66  in Institute of Biomedical on September 12, 2024 and sell it today you would lose (0.86) from holding Institute of Biomedical or give up 51.81% of portfolio value over 90 days.

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

Institute of Biomedical  vs.  XOMA Corp.

Institute of Biomedical

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Institute of Biomedical are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Institute unveiled solid returns over the last few months and may actually be approaching a breakup point.

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 Institute and XOMA

The main advantage of trading using opposite Institute and XOMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Institute 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 Institute of Biomedical 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.