Correlation Between XOMA Corp and Medicus Pharma

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

By analyzing existing cross correlation between XOMA Corp and Medicus Pharma Ltd, you can compare the effects of market volatilities on XOMA Corp and Medicus Pharma 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 Corp with a short position of Medicus Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of XOMA Corp and Medicus Pharma.

Diversification Opportunities for XOMA Corp and Medicus Pharma

0.45

Correlation Coefficient

XOMA Corp  Medicus Pharma

Very weak diversification

The 3 months correlation between XOMA and Medicus is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp and Medicus Pharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicus Pharma and XOMA Corp 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 Corp are associated (or correlated) with Medicus Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicus Pharma has no effect on the direction of XOMA Corp i.e., XOMA Corp and Medicus Pharma go up and down completely randomly.

Pair Corralation between XOMA Corp and Medicus Pharma

Assuming the 90 days horizon XOMA Corp is expected to generate 54.74 times less return on investment than Medicus Pharma. But when comparing it to its historical volatility, XOMA Corp is 15.72 times less risky than Medicus Pharma. It trades about 0.03 of its potential returns per unit of risk. Medicus Pharma Ltd is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  260.00  in Medicus Pharma Ltd on December 27, 2024 and sell it today you would earn a total of  87.02  from holding Medicus Pharma Ltd or generate 33.47% return on investment over 90 days.

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

XOMA Corp  vs.  Medicus Pharma Ltd

XOMA Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, XOMA Corp is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Medicus Pharma

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Medicus Pharma Ltd are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent fundamental indicators, Medicus Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with XOMA Corp and Medicus Pharma

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

The idea behind XOMA Corp and Medicus Pharma Ltd 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.