Correlation Between Sino Biopharmaceutica and XOMA

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

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

Diversification Opportunities for Sino Biopharmaceutica and XOMA

-0.47

Correlation Coefficient

Sino Biopharmaceutica  XOMA

Very good diversification

The 3 months correlation between Sino and XOMA is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Sino Biopharmaceutical Ltd and XOMA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XOMA and Sino Biopharmaceutica 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 Sino Biopharmaceutical Ltd 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 Sino Biopharmaceutica i.e., Sino Biopharmaceutica and XOMA go up and down completely randomly.

Pair Corralation between Sino Biopharmaceutica and XOMA

Assuming the 90 days horizon Sino Biopharmaceutical Ltd is expected to under-perform the XOMA. In addition to that, Sino Biopharmaceutica is 8.26 times more volatile than XOMA Corporation. It trades about -0.02 of its total potential returns per unit of risk. XOMA Corporation is currently generating about 0.08 per unit of volatility. If you would invest  2,510  in XOMA Corporation on December 3, 2024 and sell it today you would earn a total of  24.00  from holding XOMA Corporation or generate 0.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	93.02%
Values	Daily Returns

Sino Biopharmaceutical Ltd  vs.  XOMA Corp.

Sino Biopharmaceutical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sino Biopharmaceutical Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

XOMA

Risk-Adjusted Performance

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 Sino Biopharmaceutica and XOMA

The main advantage of trading using opposite Sino Biopharmaceutica and XOMA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sino Biopharmaceutica 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 Sino Biopharmaceutical Ltd 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.