Correlation Between Orchestra BioMed and Protalix Biotherapeutics

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

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

Diversification Opportunities for Orchestra BioMed and Protalix Biotherapeutics

0.24

Correlation Coefficient

Orchestra BioMed  Protalix Biotherapeutics

Modest diversification

The 3 months correlation between Orchestra and Protalix is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Orchestra BioMed Holdings and Protalix Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protalix Biotherapeutics and Orchestra BioMed 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 Orchestra BioMed Holdings 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 Orchestra BioMed i.e., Orchestra BioMed and Protalix Biotherapeutics go up and down completely randomly.

Pair Corralation between Orchestra BioMed and Protalix Biotherapeutics

Given the investment horizon of 90 days Orchestra BioMed Holdings is expected to under-perform the Protalix Biotherapeutics. In addition to that, Orchestra BioMed is 2.07 times more volatile than Protalix Biotherapeutics. It trades about -0.05 of its total potential returns per unit of risk. Protalix Biotherapeutics is currently generating about 0.2 per unit of volatility. If you would invest  164.00  in Protalix Biotherapeutics on December 3, 2024 and sell it today you would earn a total of  67.00  from holding Protalix Biotherapeutics or generate 40.85% return on investment over 90 days.

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

Orchestra BioMed Holdings  vs.  Protalix Biotherapeutics

Orchestra BioMed Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Orchestra BioMed Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Protalix Biotherapeutics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Protalix Biotherapeutics are ranked lower than 15 (%) 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 Orchestra BioMed and Protalix Biotherapeutics

The main advantage of trading using opposite Orchestra BioMed and Protalix Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orchestra BioMed 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 Orchestra BioMed Holdings 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.