Correlation Between XOMA and Awakn Life

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

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

Diversification Opportunities for XOMA and Awakn Life

0.29

Correlation Coefficient

XOMA  Awakn Life

Modest diversification

The 3 months correlation between XOMA and Awakn is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Awakn Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awakn Life Sciences 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 Awakn Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awakn Life Sciences has no effect on the direction of XOMA i.e., XOMA and Awakn Life go up and down completely randomly.

Pair Corralation between XOMA and Awakn Life

Assuming the 90 days horizon XOMA is expected to generate 8.42 times less return on investment than Awakn Life. But when comparing it to its historical volatility, XOMA Corporation is 25.95 times less risky than Awakn Life. It trades about 0.13 of its potential returns per unit of risk. Awakn Life Sciences is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.74  in Awakn Life Sciences on September 17, 2024 and sell it today you would lose (0.24) from holding Awakn Life Sciences or give up 3.56% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

XOMA Corp.  vs.  Awakn Life Sciences

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.

Awakn Life Sciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Awakn Life Sciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Awakn Life reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA and Awakn Life

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

The idea behind XOMA Corporation and Awakn Life Sciences 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.