Correlation Between Krystal Biotech and Amylyx Pharmaceuticals

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

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

Diversification Opportunities for Krystal Biotech and Amylyx Pharmaceuticals

0.72

Correlation Coefficient

Krystal Biotech  Amylyx Pharmaceuticals

Poor diversification

The 3 months correlation between Krystal and Amylyx is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Amylyx Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amylyx Pharmaceuticals 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 Amylyx Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amylyx Pharmaceuticals has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Amylyx Pharmaceuticals go up and down completely randomly.

Pair Corralation between Krystal Biotech and Amylyx Pharmaceuticals

Given the investment horizon of 90 days Krystal Biotech is expected to generate 0.74 times more return on investment than Amylyx Pharmaceuticals. However, Krystal Biotech is 1.35 times less risky than Amylyx Pharmaceuticals. It trades about -0.03 of its potential returns per unit of risk. Amylyx Pharmaceuticals is currently generating about -0.2 per unit of risk. If you would invest  19,742  in Krystal Biotech on November 29, 2024 and sell it today you would lose (1,632) from holding Krystal Biotech or give up 8.27% of portfolio value over 90 days.

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

Krystal Biotech  vs.  Amylyx Pharmaceuticals

Krystal Biotech

Risk-Adjusted Performance

Very Weak

Over the last 90 days Krystal Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Amylyx Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amylyx Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's essential indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Krystal Biotech and Amylyx Pharmaceuticals

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

The idea behind Krystal Biotech and Amylyx 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.