Correlation Between XOMA and PsyBio Therapeutics

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

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

Diversification Opportunities for XOMA and PsyBio Therapeutics

0.0

Correlation Coefficient

XOMA  PsyBio Therapeutics

Pay attention - limited upside

The 3 months correlation between XOMA and PsyBio is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and PsyBio Therapeutics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PsyBio Therapeutics Corp 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 PsyBio Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PsyBio Therapeutics Corp has no effect on the direction of XOMA i.e., XOMA and PsyBio Therapeutics go up and down completely randomly.

Pair Corralation between XOMA and PsyBio Therapeutics

Assuming the 90 days horizon XOMA is expected to generate 46.64 times less return on investment than PsyBio Therapeutics. But when comparing it to its historical volatility, XOMA Corporation is 58.14 times less risky than PsyBio Therapeutics. It trades about 0.06 of its potential returns per unit of risk. PsyBio Therapeutics Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4.68  in PsyBio Therapeutics Corp on December 5, 2024 and sell it today you would lose (4.67) from holding PsyBio Therapeutics Corp or give up 99.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	99.8%
Values	Daily Returns

XOMA Corp.  vs.  PsyBio Therapeutics Corp

XOMA

Risk-Adjusted Performance

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.

PsyBio Therapeutics Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PsyBio Therapeutics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, PsyBio Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with XOMA and PsyBio Therapeutics

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

The idea behind XOMA Corporation and PsyBio Therapeutics Corp 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.