Correlation Between Protalix Biotherapeutics and Xeris Pharmaceuticals

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

Diversification Opportunities for Protalix Biotherapeutics and Xeris Pharmaceuticals

0.28

Correlation Coefficient

Protalix Biotherapeutics  Xeris Pharmaceuticals

Modest diversification

The 3 months correlation between Protalix and Xeris is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Protalix Biotherapeutics and Xeris Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xeris 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 Xeris Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xeris Pharmaceuticals has no effect on the direction of Protalix Biotherapeutics i.e., Protalix Biotherapeutics and Xeris Pharmaceuticals go up and down completely randomly.

Pair Corralation between Protalix Biotherapeutics and Xeris Pharmaceuticals

Considering the 90-day investment horizon Protalix Biotherapeutics is expected to generate 1.74 times less return on investment than Xeris Pharmaceuticals. In addition to that, Protalix Biotherapeutics is 1.1 times more volatile than Xeris Pharmaceuticals. It trades about 0.14 of its total potential returns per unit of risk. Xeris Pharmaceuticals is currently generating about 0.27 per unit of volatility. If you would invest  349.00  in Xeris Pharmaceuticals on December 20, 2024 and sell it today you would earn a total of  202.00  from holding Xeris Pharmaceuticals or generate 57.88% return on investment over 90 days.

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

Protalix Biotherapeutics  vs.  Xeris 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 10 (%) 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.

Xeris Pharmaceuticals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xeris Pharmaceuticals are ranked lower than 20 (%) 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.

Pair Trading with Protalix Biotherapeutics and Xeris Pharmaceuticals

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

The idea behind Protalix Biotherapeutics and Xeris 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.