Correlation Between Protalix Biotherapeutics and Kodiak Sciences

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

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

Diversification Opportunities for Protalix Biotherapeutics and Kodiak Sciences

0.93

Correlation Coefficient

Protalix Biotherapeutics  Kodiak Sciences

Almost no diversification

The 3 months correlation between Protalix and Kodiak is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Protalix Biotherapeutics and Kodiak Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Sciences and Protalix Biotherapeutics 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 Protalix Biotherapeutics are associated (or correlated) with Kodiak Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Sciences has no effect on the direction of Protalix Biotherapeutics i.e., Protalix Biotherapeutics and Kodiak Sciences go up and down completely randomly.

Pair Corralation between Protalix Biotherapeutics and Kodiak Sciences

Considering the 90-day investment horizon Protalix Biotherapeutics is expected to generate 0.41 times more return on investment than Kodiak Sciences. However, Protalix Biotherapeutics is 2.45 times less risky than Kodiak Sciences. It trades about 0.39 of its potential returns per unit of risk. Kodiak Sciences is currently generating about -0.04 per unit of risk. 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	Very Strong
Accuracy	100.0%
Values	Daily Returns

Protalix Biotherapeutics  vs.  Kodiak Sciences

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.

Kodiak Sciences

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Protalix Biotherapeutics and Kodiak Sciences

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

The idea behind Protalix Biotherapeutics and Kodiak 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.