Correlation Between Sonoma Pharmaceuticals and Xeris Pharmaceuticals

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

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

Diversification Opportunities for Sonoma Pharmaceuticals and Xeris Pharmaceuticals

-0.34

Correlation Coefficient

Sonoma Pharmaceuticals  Xeris Pharmaceuticals

Very good diversification

The 3 months correlation between Sonoma and Xeris is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Sonoma Pharmaceuticals and Xeris Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xeris Pharmaceuticals and Sonoma Pharmaceuticals 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 Sonoma Pharmaceuticals are associated (or correlated) with Xeris Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xeris Pharmaceuticals has no effect on the direction of Sonoma Pharmaceuticals i.e., Sonoma Pharmaceuticals and Xeris Pharmaceuticals go up and down completely randomly.

Pair Corralation between Sonoma Pharmaceuticals and Xeris Pharmaceuticals

Given the investment horizon of 90 days Sonoma Pharmaceuticals is expected to under-perform the Xeris Pharmaceuticals. In addition to that, Sonoma Pharmaceuticals is 2.58 times more volatile than Xeris Pharmaceuticals. It trades about -0.06 of its total potential returns per unit of risk. Xeris Pharmaceuticals is currently generating about 0.1 per unit of volatility. If you would invest  236.00  in Xeris Pharmaceuticals on October 10, 2024 and sell it today you would earn a total of  99.00  from holding Xeris Pharmaceuticals or generate 41.95% return on investment over 90 days.

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

Sonoma Pharmaceuticals  vs.  Xeris Pharmaceuticals

Sonoma Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonoma Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Sonoma Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Xeris Pharmaceuticals

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xeris Pharmaceuticals are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Xeris Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonoma Pharmaceuticals and Xeris Pharmaceuticals

The main advantage of trading using opposite Sonoma Pharmaceuticals and Xeris Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sonoma Pharmaceuticals position performs unexpectedly, Xeris Pharmaceuticals 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 Xeris Pharmaceuticals will offset losses from the drop in Xeris Pharmaceuticals' long position.

The idea behind Sonoma Pharmaceuticals and Xeris Pharmaceuticals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.