Correlation Between XOMA and Adial Pharmaceuticals

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

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

Diversification Opportunities for XOMA and Adial Pharmaceuticals

-0.18

Correlation Coefficient

XOMA  Adial Pharmaceuticals

Good diversification

The 3 months correlation between XOMA and Adial is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Adial Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adial Pharmaceuticals 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 Adial Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adial Pharmaceuticals has no effect on the direction of XOMA i.e., XOMA and Adial Pharmaceuticals go up and down completely randomly.

Pair Corralation between XOMA and Adial Pharmaceuticals

Assuming the 90 days horizon XOMA is expected to generate 19.79 times less return on investment than Adial Pharmaceuticals. But when comparing it to its historical volatility, XOMA Corporation is 12.49 times less risky than Adial Pharmaceuticals. It trades about 0.08 of its potential returns per unit of risk. Adial Pharmaceuticals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Adial Pharmaceuticals on September 17, 2024 and sell it today you would earn a total of  8.00  from holding Adial Pharmaceuticals or generate 7.92% 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.  Adial Pharmaceuticals

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.

Adial Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adial Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent forward indicators, Adial Pharmaceuticals is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with XOMA and Adial Pharmaceuticals

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

The idea behind XOMA Corporation and Adial 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.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.