Correlation Between XOMA and Transcode Therapeutics

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

Diversification Opportunities for XOMA and Transcode Therapeutics

0.46

Correlation Coefficient

XOMA  Transcode Therapeutics

Very weak diversification

The 3 months correlation between XOMA and Transcode is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Transcode Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcode Therapeutics 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 Transcode Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcode Therapeutics has no effect on the direction of XOMA i.e., XOMA and Transcode Therapeutics go up and down completely randomly.

Pair Corralation between XOMA and Transcode Therapeutics

Assuming the 90 days horizon XOMA Corporation is expected to generate 0.03 times more return on investment than Transcode Therapeutics. However, XOMA Corporation is 31.4 times less risky than Transcode Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Transcode Therapeutics is currently generating about -0.18 per unit of risk. If you would invest  2,539  in XOMA Corporation on September 17, 2024 and sell it today you would earn a total of  11.00  from holding XOMA Corporation or generate 0.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

XOMA Corp.  vs.  Transcode Therapeutics

XOMA

Risk-Adjusted Performance

10 of 100

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.

Transcode Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Transcode Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Transcode Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA and Transcode Therapeutics

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

The idea behind XOMA Corporation and Transcode Therapeutics 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.