Correlation Between Krystal Biotech and Biofrontera

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

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

Diversification Opportunities for Krystal Biotech and Biofrontera

-0.3

Correlation Coefficient

Krystal Biotech  Biofrontera

Very good diversification

The 3 months correlation between Krystal and Biofrontera is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Biofrontera in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biofrontera 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 Biofrontera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biofrontera has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Biofrontera go up and down completely randomly.

Pair Corralation between Krystal Biotech and Biofrontera

Given the investment horizon of 90 days Krystal Biotech is expected to under-perform the Biofrontera. But the stock apears to be less risky and, when comparing its historical volatility, Krystal Biotech is 2.93 times less risky than Biofrontera. The stock trades about -0.07 of its potential returns per unit of risk. The Biofrontera is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  80.00  in Biofrontera on October 11, 2024 and sell it today you would earn a total of  38.00  from holding Biofrontera or generate 47.5% 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.  Biofrontera

Krystal Biotech

Risk-Adjusted Performance

0 of 100

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.

Biofrontera

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Biofrontera are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Biofrontera demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krystal Biotech and Biofrontera

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

The idea behind Krystal Biotech and Biofrontera 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.