Correlation Between XOMA Corp and Star Equity

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

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

Diversification Opportunities for XOMA Corp and Star Equity

0.1

Correlation Coefficient

XOMA Corp  Star Equity

Average diversification

The 3 months correlation between XOMA and Star is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding XOMA Corp and Star Equity Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Star Equity Holdings 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 Star Equity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Star Equity Holdings has no effect on the direction of XOMA Corp i.e., XOMA Corp and Star Equity go up and down completely randomly.

Pair Corralation between XOMA Corp and Star Equity

Assuming the 90 days horizon XOMA Corp is expected to generate 4.0 times less return on investment than Star Equity. But when comparing it to its historical volatility, XOMA Corp is 3.07 times less risky than Star Equity. It trades about 0.07 of its potential returns per unit of risk. Star Equity Holdings is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  869.00  in Star Equity Holdings on December 28, 2024 and sell it today you would earn a total of  83.00  from holding Star Equity Holdings or generate 9.55% 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.  Star Equity Holdings

XOMA Corp

Risk-Adjusted Performance

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.

Star Equity Holdings

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Star Equity Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Star Equity may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with XOMA Corp and Star Equity

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

The idea behind XOMA Corp and Star Equity 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.

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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.