Correlation Between Beam Therapeutics and Krystal Biotech

Can any of the company-specific risk be diversified away by investing in both Beam Therapeutics and Krystal Biotech 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 Beam Therapeutics and Krystal Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Beam Therapeutics and Krystal Biotech

-0.07

Correlation Coefficient

Beam Therapeutics  Krystal Biotech

Good diversification

The 3 months correlation between Beam and Krystal is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Beam Therapeutics and Krystal Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krystal Biotech and Beam Therapeutics 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 Beam Therapeutics are associated (or correlated) with Krystal Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krystal Biotech has no effect on the direction of Beam Therapeutics i.e., Beam Therapeutics and Krystal Biotech go up and down completely randomly.

Pair Corralation between Beam Therapeutics and Krystal Biotech

Given the investment horizon of 90 days Beam Therapeutics is expected to under-perform the Krystal Biotech. In addition to that, Beam Therapeutics is 1.65 times more volatile than Krystal Biotech. It trades about -0.03 of its total potential returns per unit of risk. Krystal Biotech is currently generating about 0.1 per unit of volatility. If you would invest  15,980  in Krystal Biotech on December 28, 2024 and sell it today you would earn a total of  2,412  from holding Krystal Biotech or generate 15.09% return on investment over 90 days.

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

Beam Therapeutics  vs.  Krystal Biotech

Beam Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beam Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Krystal Biotech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krystal Biotech are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Krystal Biotech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beam Therapeutics and Krystal Biotech

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

The idea behind Beam Therapeutics and Krystal Biotech 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.