Correlation Between Xeris Pharmaceuticals and Protalix Biotherapeutics

Can any of the company-specific risk be diversified away by investing in both Xeris 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 Xeris 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 Xeris Pharmaceuticals and Protalix Biotherapeutics, you can compare the effects of market volatilities on Xeris 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 Xeris Pharmaceuticals with a short position of Protalix Biotherapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Xeris Pharmaceuticals and Protalix Biotherapeutics.

Diversification Opportunities for Xeris Pharmaceuticals and Protalix Biotherapeutics

0.48

Correlation Coefficient

Xeris Pharmaceuticals  Protalix Biotherapeutics

Very weak diversification

The 3 months correlation between Xeris and Protalix is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Xeris Pharmaceuticals and Protalix Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protalix Biotherapeutics and Xeris 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 Xeris 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 Xeris Pharmaceuticals i.e., Xeris Pharmaceuticals and Protalix Biotherapeutics go up and down completely randomly.

Pair Corralation between Xeris Pharmaceuticals and Protalix Biotherapeutics

Given the investment horizon of 90 days Xeris Pharmaceuticals is expected to generate 2.07 times less return on investment than Protalix Biotherapeutics. But when comparing it to its historical volatility, Xeris Pharmaceuticals is 1.57 times less risky than Protalix Biotherapeutics. It trades about 0.15 of its potential returns per unit of risk. Protalix Biotherapeutics is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  101.00  in Protalix Biotherapeutics on September 4, 2024 and sell it today you would earn a total of  66.00  from holding Protalix Biotherapeutics or generate 65.35% return on investment over 90 days.

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

Xeris Pharmaceuticals  vs.  Protalix Biotherapeutics

Xeris Pharmaceuticals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Xeris Pharmaceuticals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Xeris Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Protalix Biotherapeutics

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Protalix Biotherapeutics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain essential indicators, Protalix Biotherapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xeris Pharmaceuticals and Protalix Biotherapeutics

The main advantage of trading using opposite Xeris Pharmaceuticals and Protalix Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xeris 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 Xeris 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.

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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.