Correlation Between Protalix Biotherapeutics and Hermes International

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

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

Diversification Opportunities for Protalix Biotherapeutics and Hermes International

-0.52

Correlation Coefficient

Protalix Biotherapeutics  Hermes International

Excellent diversification

The 3 months correlation between Protalix and Hermes is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Protalix Biotherapeutics and Hermes International SCA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hermes International SCA 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 Hermes International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hermes International SCA has no effect on the direction of Protalix Biotherapeutics i.e., Protalix Biotherapeutics and Hermes International go up and down completely randomly.

Pair Corralation between Protalix Biotherapeutics and Hermes International

Considering the 90-day investment horizon Protalix Biotherapeutics is expected to generate 2.6 times more return on investment than Hermes International. However, Protalix Biotherapeutics is 2.6 times more volatile than Hermes International SCA. It trades about -0.03 of its potential returns per unit of risk. Hermes International SCA is currently generating about -0.22 per unit of risk. If you would invest  122.00  in Protalix Biotherapeutics on January 24, 2024 and sell it today you would lose (4.00) from holding Protalix Biotherapeutics or give up 3.28% of portfolio value over 90 days.

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

Protalix Biotherapeutics  vs.  Hermes International SCA

Protalix Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Protalix Biotherapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Hermes International SCA

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hermes International SCA are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Hermes International reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Protalix Biotherapeutics and Hermes International

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

The idea behind Protalix Biotherapeutics and Hermes International SCA 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.