Correlation Between Protalix Biotherapeutics and Lexicon Pharmaceuticals

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

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

Diversification Opportunities for Protalix Biotherapeutics and Lexicon Pharmaceuticals

0.0

Correlation Coefficient

Protalix Biotherapeutics  Lexicon Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Protalix and Lexicon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Protalix Biotherapeutics and Lexicon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexicon Pharmaceuticals 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 Lexicon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexicon Pharmaceuticals has no effect on the direction of Protalix Biotherapeutics i.e., Protalix Biotherapeutics and Lexicon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Protalix Biotherapeutics and Lexicon Pharmaceuticals

Considering the 90-day investment horizon Protalix Biotherapeutics is expected to generate 0.63 times more return on investment than Lexicon Pharmaceuticals. However, Protalix Biotherapeutics is 1.58 times less risky than Lexicon Pharmaceuticals. It trades about 0.02 of its potential returns per unit of risk. Lexicon Pharmaceuticals is currently generating about -0.25 per unit of risk. If you would invest  231.00  in Protalix Biotherapeutics on November 29, 2024 and sell it today you would earn a total of  1.50  from holding Protalix Biotherapeutics or generate 0.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Protalix Biotherapeutics  vs.  Lexicon Pharmaceuticals

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.

Lexicon Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lexicon Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Lexicon Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Protalix Biotherapeutics and Lexicon Pharmaceuticals

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

The idea behind Protalix Biotherapeutics and Lexicon Pharmaceuticals 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.