Correlation Between XOMA and Eledon Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both XOMA and Eledon 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 Eledon 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 Eledon Pharmaceuticals, you can compare the effects of market volatilities on XOMA and Eledon 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 Eledon Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of XOMA and Eledon Pharmaceuticals.

Diversification Opportunities for XOMA and Eledon Pharmaceuticals

-0.06

Correlation Coefficient

XOMA  Eledon Pharmaceuticals

Good diversification

The 3 months correlation between XOMA and Eledon is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Eledon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eledon 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 Eledon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eledon Pharmaceuticals has no effect on the direction of XOMA i.e., XOMA and Eledon Pharmaceuticals go up and down completely randomly.

Pair Corralation between XOMA and Eledon Pharmaceuticals

Assuming the 90 days horizon XOMA Corporation is expected to generate 0.09 times more return on investment than Eledon Pharmaceuticals. However, XOMA Corporation is 11.25 times less risky than Eledon Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Eledon Pharmaceuticals is currently generating about -0.03 per unit of risk. If you would invest  2,499  in XOMA Corporation on October 20, 2024 and sell it today you would earn a total of  23.00  from holding XOMA Corporation or generate 0.92% 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.  Eledon Pharmaceuticals

XOMA

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 2 (%) 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.

Eledon Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Eledon Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Eledon Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA and Eledon Pharmaceuticals

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

The idea behind XOMA Corporation and Eledon 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.