Correlation Between XOMA and Sachem Capital

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

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

Diversification Opportunities for XOMA and Sachem Capital

-0.03

Correlation Coefficient

XOMA  Sachem Capital

Good diversification

The 3 months correlation between XOMA and Sachem is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp. and Sachem Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sachem Capital 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 Sachem Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sachem Capital Corp has no effect on the direction of XOMA i.e., XOMA and Sachem Capital go up and down completely randomly.

Pair Corralation between XOMA and Sachem Capital

Assuming the 90 days horizon XOMA is expected to generate 6.62 times less return on investment than Sachem Capital. But when comparing it to its historical volatility, XOMA Corporation is 13.54 times less risky than Sachem Capital. It trades about 0.08 of its potential returns per unit of risk. Sachem Capital Corp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,539  in Sachem Capital Corp on December 30, 2024 and sell it today you would earn a total of  73.00  from holding Sachem Capital Corp or generate 4.74% return on investment over 90 days.

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

XOMA Corp.  vs.  Sachem Capital Corp

XOMA

Risk-Adjusted Performance

Modest

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.

Sachem Capital Corp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sachem Capital Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Sachem Capital may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XOMA and Sachem Capital

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

The idea behind XOMA Corporation and Sachem Capital 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.