Correlation Between XOMA and Adagene

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

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

Diversification Opportunities for XOMA and Adagene

-0.32

Correlation Coefficient

XOMA  Adagene

Very good diversification

The 3 months correlation between XOMA and Adagene is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Adagene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adagene and XOMA 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 XOMA Corporation are associated (or correlated) with Adagene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adagene has no effect on the direction of XOMA i.e., XOMA and Adagene go up and down completely randomly.

Pair Corralation between XOMA and Adagene

Assuming the 90 days horizon XOMA is expected to generate 53.0 times less return on investment than Adagene. But when comparing it to its historical volatility, XOMA Corporation is 17.87 times less risky than Adagene. It trades about 0.05 of its potential returns per unit of risk. Adagene is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  191.00  in Adagene on December 5, 2024 and sell it today you would earn a total of  15.00  from holding Adagene or generate 7.85% return on investment over 90 days.

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

XOMA Corp.  vs.  Adagene

XOMA

Risk-Adjusted Performance

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.

Adagene

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Adagene is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with XOMA and Adagene

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

The idea behind XOMA Corporation and Adagene 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.

Check out your portfolio center.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.