Correlation Between XOMA and Institute

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

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

Diversification Opportunities for XOMA and Institute

0.19

Correlation Coefficient

XOMA  Institute

Average diversification

The 3 months correlation between XOMA and Institute is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Institute of Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Institute of Biomedical 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 Institute. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Institute of Biomedical has no effect on the direction of XOMA i.e., XOMA and Institute go up and down completely randomly.

Pair Corralation between XOMA and Institute

Assuming the 90 days horizon XOMA is expected to generate 7.46 times less return on investment than Institute. But when comparing it to its historical volatility, XOMA Corporation is 37.98 times less risky than Institute. It trades about 0.06 of its potential returns per unit of risk. Institute of Biomedical is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  1.45  in Institute of Biomedical on December 26, 2024 and sell it today you would lose (0.28) from holding Institute of Biomedical or give up 19.31% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

XOMA Corp.  vs.  Institute of Biomedical

XOMA

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corporation are ranked lower than 4 (%) 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.

Institute of Biomedical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Institute of Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak technical and fundamental indicators, Institute may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XOMA and Institute

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

The idea behind XOMA Corporation and Institute of Biomedical 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.