Correlation Between Krystal Biotech and Fortress Biotech

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

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

Diversification Opportunities for Krystal Biotech and Fortress Biotech

-0.5

Correlation Coefficient

Krystal Biotech  Fortress Biotech

Very good diversification

The 3 months correlation between Krystal and Fortress is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Fortress Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fortress Biotech 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 Fortress Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fortress Biotech has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Fortress Biotech go up and down completely randomly.

Pair Corralation between Krystal Biotech and Fortress Biotech

Given the investment horizon of 90 days Krystal Biotech is expected to generate 0.64 times more return on investment than Fortress Biotech. However, Krystal Biotech is 1.56 times less risky than Fortress Biotech. It trades about 0.1 of its potential returns per unit of risk. Fortress Biotech is currently generating about 0.01 per unit of risk. If you would invest  16,483  in Krystal Biotech on December 20, 2024 and sell it today you would earn a total of  2,378  from holding Krystal Biotech or generate 14.43% return on investment over 90 days.

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

Krystal Biotech  vs.  Fortress Biotech

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.

Fortress Biotech

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fortress Biotech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Fortress Biotech 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 Fortress Biotech

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

The idea behind Krystal Biotech and Fortress 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.