Correlation Between Krystal Biotech and Agios Pharm

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

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

Diversification Opportunities for Krystal Biotech and Agios Pharm

-0.37

Correlation Coefficient

Krystal Biotech  Agios Pharm

Very good diversification

The 3 months correlation between Krystal and Agios is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Agios Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agios Pharm and Krystal Biotech 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 Krystal Biotech are associated (or correlated) with Agios Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agios Pharm has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Agios Pharm go up and down completely randomly.

Pair Corralation between Krystal Biotech and Agios Pharm

Given the investment horizon of 90 days Krystal Biotech is expected to generate 1.04 times more return on investment than Agios Pharm. However, Krystal Biotech is 1.04 times more volatile than Agios Pharm. It trades about 0.11 of its potential returns per unit of risk. Agios Pharm is currently generating about -0.03 per unit of risk. If you would invest  15,980  in Krystal Biotech on December 28, 2024 and sell it today you would earn a total of  2,730  from holding Krystal Biotech or generate 17.08% return on investment over 90 days.

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

Krystal Biotech  vs.  Agios Pharm

Krystal Biotech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Krystal Biotech are ranked lower than 8 (%) 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.

Agios Pharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agios Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Agios Pharm is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Krystal Biotech and Agios Pharm

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

The idea behind Krystal Biotech and Agios Pharm 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.

Check out your portfolio center.

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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.