Correlation Between Krystal Biotech and Cyclo Therapeutics

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

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

Diversification Opportunities for Krystal Biotech and Cyclo Therapeutics

0.4

Correlation Coefficient

Krystal Biotech  Cyclo Therapeutics

Very weak diversification

The 3 months correlation between Krystal and Cyclo is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Cyclo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclo Therapeutics 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 Cyclo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclo Therapeutics has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Cyclo Therapeutics go up and down completely randomly.

Pair Corralation between Krystal Biotech and Cyclo Therapeutics

Given the investment horizon of 90 days Krystal Biotech is expected to under-perform the Cyclo Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Krystal Biotech is 1.54 times less risky than Cyclo Therapeutics. The stock trades about -0.22 of its potential returns per unit of risk. The Cyclo Therapeutics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Cyclo Therapeutics on October 10, 2024 and sell it today you would earn a total of  3.00  from holding Cyclo Therapeutics or generate 4.84% return on investment over 90 days.

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

Krystal Biotech  vs.  Cyclo Therapeutics

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 comparatively stable basic indicators, Krystal Biotech is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Cyclo Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cyclo Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Krystal Biotech and Cyclo Therapeutics

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

The idea behind Krystal Biotech and Cyclo Therapeutics 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.