Correlation Between Fortress Biotech and Protalix Biotherapeutics

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

By analyzing existing cross correlation between Fortress Biotech Pref and Protalix Biotherapeutics, you can compare the effects of market volatilities on Fortress Biotech 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 Fortress Biotech with a short position of Protalix Biotherapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fortress Biotech and Protalix Biotherapeutics.

Diversification Opportunities for Fortress Biotech and Protalix Biotherapeutics

0.67

Correlation Coefficient

Fortress Biotech  Protalix Biotherapeutics

Poor diversification

The 3 months correlation between Fortress and Protalix is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Fortress Biotech Pref and Protalix Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protalix Biotherapeutics and Fortress Biotech 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 Fortress Biotech Pref 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 Fortress Biotech i.e., Fortress Biotech and Protalix Biotherapeutics go up and down completely randomly.

Pair Corralation between Fortress Biotech and Protalix Biotherapeutics

Assuming the 90 days horizon Fortress Biotech is expected to generate 3.58 times less return on investment than Protalix Biotherapeutics. In addition to that, Fortress Biotech is 1.74 times more volatile than Protalix Biotherapeutics. It trades about 0.06 of its total potential returns per unit of risk. Protalix Biotherapeutics is currently generating about 0.39 per unit of volatility. If you would invest  176.00  in Protalix Biotherapeutics on October 8, 2024 and sell it today you would earn a total of  36.00  from holding Protalix Biotherapeutics or generate 20.45% return on investment over 90 days.

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

Fortress Biotech Pref  vs.  Protalix Biotherapeutics

Fortress Biotech Pref

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech Pref are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Fortress Biotech reported solid returns over the last few months and may actually be approaching a breakup point.

Protalix Biotherapeutics

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Protalix Biotherapeutics are ranked lower than 25 (%) 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 Fortress Biotech and Protalix Biotherapeutics

The main advantage of trading using opposite Fortress Biotech and Protalix Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fortress Biotech 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 Fortress Biotech Pref 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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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..