Correlation Between XOMA and Fortress Biotech

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Can any of the company-specific risk be diversified away by investing in both XOMA and Fortress Biotech 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 Fortress Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between XOMA Corporation and Fortress Biotech Pref, you can compare the effects of market volatilities on XOMA and Fortress Biotech 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 Fortress Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of XOMA and Fortress Biotech.

Diversification Opportunities for XOMA and Fortress Biotech

0.22
  Correlation Coefficient

Modest diversification

The 3 months correlation between XOMA and Fortress is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Fortress Biotech Pref in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech Pref 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 Fortress Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Biotech Pref has no effect on the direction of XOMA i.e., XOMA and Fortress Biotech go up and down completely randomly.

Pair Corralation between XOMA and Fortress Biotech

Assuming the 90 days horizon XOMA Corporation is expected to generate 0.11 times more return on investment than Fortress Biotech. However, XOMA Corporation is 9.05 times less risky than Fortress Biotech. It trades about 0.09 of its potential returns per unit of risk. Fortress Biotech Pref is currently generating about 0.0 per unit of risk. If you would invest  2,426  in XOMA Corporation on October 10, 2024 and sell it today you would earn a total of  108.00  from holding XOMA Corporation or generate 4.45% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

XOMA Corp.  vs.  Fortress Biotech Pref

 Performance 
       Timeline  
XOMA 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 6 (%) 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.
Fortress Biotech Pref 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech Pref are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fortress Biotech reported solid returns over the last few months and may actually be approaching a breakup point.

XOMA and Fortress Biotech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with XOMA and Fortress Biotech

The main advantage of trading using opposite XOMA and Fortress Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if XOMA position performs unexpectedly, Fortress Biotech 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 Fortress Biotech will offset losses from the drop in Fortress Biotech's long position.
The idea behind XOMA Corporation and Fortress Biotech Pref 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.
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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