Correlation Between Pluristem and BioLight Life

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

By analyzing existing cross correlation between Pluristem and BioLight Life Sciences, you can compare the effects of market volatilities on Pluristem and BioLight Life 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 Pluristem with a short position of BioLight Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pluristem and BioLight Life.

Diversification Opportunities for Pluristem and BioLight Life

-0.17

Correlation Coefficient

Pluristem  BioLight Life

Good diversification

The 3 months correlation between Pluristem and BioLight is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Pluristem and BioLight Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BioLight Life Sciences and Pluristem 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 Pluristem are associated (or correlated) with BioLight Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BioLight Life Sciences has no effect on the direction of Pluristem i.e., Pluristem and BioLight Life go up and down completely randomly.

Pair Corralation between Pluristem and BioLight Life

Assuming the 90 days trading horizon Pluristem is expected to under-perform the BioLight Life. But the stock apears to be less risky and, when comparing its historical volatility, Pluristem is 1.33 times less risky than BioLight Life. The stock trades about -0.13 of its potential returns per unit of risk. The BioLight Life Sciences is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  43,500  in BioLight Life Sciences on September 27, 2024 and sell it today you would earn a total of  6,400  from holding BioLight Life Sciences or generate 14.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.83%
Values	Daily Returns

Pluristem  vs.  BioLight Life Sciences

Pluristem

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pluristem has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

BioLight Life Sciences

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BioLight Life Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, BioLight Life sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pluristem and BioLight Life

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

The idea behind Pluristem and BioLight Life Sciences 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.