Correlation Between Vera Therapeutics and XTL Biopharmaceutica

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

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

Diversification Opportunities for Vera Therapeutics and XTL Biopharmaceutica

0.76

Correlation Coefficient

Vera Therapeutics  XTL Biopharmaceutica

Poor diversification

The 3 months correlation between Vera and XTL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Vera Therapeutics and XTL Biopharmaceuticals Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on XTL Biopharmaceuticals and Vera 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 Vera Therapeutics are associated (or correlated) with XTL Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of XTL Biopharmaceuticals has no effect on the direction of Vera Therapeutics i.e., Vera Therapeutics and XTL Biopharmaceutica go up and down completely randomly.

Pair Corralation between Vera Therapeutics and XTL Biopharmaceutica

Given the investment horizon of 90 days Vera Therapeutics is expected to generate 0.79 times more return on investment than XTL Biopharmaceutica. However, Vera Therapeutics is 1.27 times less risky than XTL Biopharmaceutica. It trades about -0.17 of its potential returns per unit of risk. XTL Biopharmaceuticals Ltd is currently generating about -0.17 per unit of risk. If you would invest  4,245  in Vera Therapeutics on December 26, 2024 and sell it today you would lose (1,550) from holding Vera Therapeutics or give up 36.51% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Vera Therapeutics  vs.  XTL Biopharmaceuticals Ltd

Vera Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vera Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

XTL Biopharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days XTL Biopharmaceuticals Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Vera Therapeutics and XTL Biopharmaceutica

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

The idea behind Vera Therapeutics and XTL Biopharmaceuticals Ltd 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.