Correlation Between XOMA and Benitec Biopharma

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

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

Diversification Opportunities for XOMA and Benitec Biopharma

0.75

Correlation Coefficient

XOMA  Benitec Biopharma

Poor diversification

The 3 months correlation between XOMA and Benitec is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Benitec Biopharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benitec Biopharma 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 Benitec Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benitec Biopharma has no effect on the direction of XOMA i.e., XOMA and Benitec Biopharma go up and down completely randomly.

Pair Corralation between XOMA and Benitec Biopharma

Assuming the 90 days horizon XOMA is expected to generate 17.0 times less return on investment than Benitec Biopharma. But when comparing it to its historical volatility, XOMA Corporation is 14.07 times less risky than Benitec Biopharma. It trades about 0.12 of its potential returns per unit of risk. Benitec Biopharma Ltd is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  815.00  in Benitec Biopharma Ltd on September 13, 2024 and sell it today you would earn a total of  420.00  from holding Benitec Biopharma Ltd or generate 51.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

XOMA Corp.  vs.  Benitec Biopharma Ltd

XOMA

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 9 (%) 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.

Benitec Biopharma

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Benitec Biopharma Ltd are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Benitec Biopharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA and Benitec Biopharma

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

The idea behind XOMA Corporation and Benitec Biopharma 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.