Correlation Between XOMA and Reviva Pharmaceuticals

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

Diversification Opportunities for XOMA and Reviva Pharmaceuticals

0.17

Correlation Coefficient

XOMA  Reviva Pharmaceuticals

Average diversification

The 3 months correlation between XOMA and Reviva is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Reviva Pharmaceuticals Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reviva 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 Reviva Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reviva Pharmaceuticals has no effect on the direction of XOMA i.e., XOMA and Reviva Pharmaceuticals go up and down completely randomly.

Pair Corralation between XOMA and Reviva Pharmaceuticals

Assuming the 90 days horizon XOMA Corporation is expected to generate 0.11 times more return on investment than Reviva Pharmaceuticals. However, XOMA Corporation is 8.71 times less risky than Reviva Pharmaceuticals. It trades about 0.06 of its potential returns per unit of risk. Reviva Pharmaceuticals Holdings is currently generating about 0.0 per unit of risk. If you would invest  1,998  in XOMA Corporation on December 5, 2024 and sell it today you would earn a total of  542.00  from holding XOMA Corporation or generate 27.13% return on investment over 90 days.

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

XOMA Corp.  vs.  Reviva Pharmaceuticals Holding

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.

Reviva Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Reviva Pharmaceuticals Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Reviva Pharmaceuticals demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA and Reviva Pharmaceuticals

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

The idea behind XOMA Corporation and Reviva Pharmaceuticals Holdings 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.