Correlation Between Transcode Therapeutics and XOMA

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

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

Diversification Opportunities for Transcode Therapeutics and XOMA

0.46

Correlation Coefficient

Transcode Therapeutics  XOMA

Very weak diversification

The 3 months correlation between Transcode and XOMA is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Transcode Therapeutics and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA and Transcode Therapeutics 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 Transcode Therapeutics 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 Transcode Therapeutics i.e., Transcode Therapeutics and XOMA go up and down completely randomly.

Pair Corralation between Transcode Therapeutics and XOMA

Given the investment horizon of 90 days Transcode Therapeutics is expected to generate 34.34 times more return on investment than XOMA. However, Transcode Therapeutics is 34.34 times more volatile than XOMA Corporation. It trades about 0.02 of its potential returns per unit of risk. XOMA Corporation is currently generating about 0.13 per unit of risk. If you would invest  957.00  in Transcode Therapeutics on September 17, 2024 and sell it today you would lose (215.00) from holding Transcode Therapeutics or give up 22.47% of portfolio value over 90 days.

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

Transcode Therapeutics  vs.  XOMA Corp.

Transcode Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transcode Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Transcode Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

XOMA

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 10 (%) 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 Transcode Therapeutics and XOMA

The main advantage of trading using opposite Transcode Therapeutics and XOMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transcode Therapeutics 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 Transcode Therapeutics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.