Correlation Between XOMA Corp and Ammo Preferred

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

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

Diversification Opportunities for XOMA Corp and Ammo Preferred

-0.78

Correlation Coefficient

XOMA Corp  Ammo Preferred

Pay attention - limited upside

The 3 months correlation between XOMA and Ammo is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp and Ammo Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ammo Preferred 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 Ammo Preferred. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ammo Preferred has no effect on the direction of XOMA Corp i.e., XOMA Corp and Ammo Preferred go up and down completely randomly.

Pair Corralation between XOMA Corp and Ammo Preferred

Assuming the 90 days horizon XOMA Corp is expected to generate 3.2 times less return on investment than Ammo Preferred. But when comparing it to its historical volatility, XOMA Corp is 7.75 times less risky than Ammo Preferred. It trades about 0.08 of its potential returns per unit of risk. Ammo Preferred is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,047  in Ammo Preferred on September 12, 2024 and sell it today you would earn a total of  28.00  from holding Ammo Preferred or generate 1.37% return on investment over 90 days.

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

XOMA Corp  vs.  Ammo Preferred

XOMA Corp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in XOMA Corp are ranked lower than 5 (%) 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.

Ammo Preferred

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ammo Preferred has generated negative risk-adjusted returns adding no value to investors with long positions. Even with abnormal performance in the last few months, the Preferred Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with XOMA Corp and Ammo Preferred

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

The idea behind XOMA Corp and Ammo Preferred 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.