Correlation Between Eyepoint Pharmaceuticals and Protalix Biotherapeutics
Can any of the company-specific risk be diversified away by investing in both Eyepoint Pharmaceuticals and Protalix Biotherapeutics 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 Eyepoint Pharmaceuticals and Protalix Biotherapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Eyepoint Pharmaceuticals and Protalix Biotherapeutics, you can compare the effects of market volatilities on Eyepoint Pharmaceuticals and Protalix Biotherapeutics 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 Eyepoint Pharmaceuticals with a short position of Protalix Biotherapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eyepoint Pharmaceuticals and Protalix Biotherapeutics.
Diversification Opportunities for Eyepoint Pharmaceuticals and Protalix Biotherapeutics
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Eyepoint and Protalix is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Eyepoint Pharmaceuticals and Protalix Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protalix Biotherapeutics and Eyepoint Pharmaceuticals 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 Eyepoint Pharmaceuticals are associated (or correlated) with Protalix Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protalix Biotherapeutics has no effect on the direction of Eyepoint Pharmaceuticals i.e., Eyepoint Pharmaceuticals and Protalix Biotherapeutics go up and down completely randomly.
Pair Corralation between Eyepoint Pharmaceuticals and Protalix Biotherapeutics
Given the investment horizon of 90 days Eyepoint Pharmaceuticals is expected to generate 12.08 times less return on investment than Protalix Biotherapeutics. In addition to that, Eyepoint Pharmaceuticals is 1.33 times more volatile than Protalix Biotherapeutics. It trades about 0.01 of its total potential returns per unit of risk. Protalix Biotherapeutics is currently generating about 0.22 per unit of volatility. If you would invest 106.00 in Protalix Biotherapeutics on September 12, 2024 and sell it today you would earn a total of 77.00 from holding Protalix Biotherapeutics or generate 72.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Eyepoint Pharmaceuticals vs. Protalix Biotherapeutics
Performance |
Timeline |
Eyepoint Pharmaceuticals |
Protalix Biotherapeutics |
Eyepoint Pharmaceuticals and Protalix Biotherapeutics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Eyepoint Pharmaceuticals and Protalix Biotherapeutics
The main advantage of trading using opposite Eyepoint Pharmaceuticals and Protalix Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eyepoint Pharmaceuticals position performs unexpectedly, Protalix Biotherapeutics 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 Protalix Biotherapeutics will offset losses from the drop in Protalix Biotherapeutics' long position.The idea behind Eyepoint Pharmaceuticals and Protalix Biotherapeutics 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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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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