Correlation Between Krystal Biotech and Forte Biosciences

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

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

Diversification Opportunities for Krystal Biotech and Forte Biosciences

-0.19

Correlation Coefficient

Krystal Biotech  Forte Biosciences

Good diversification

The 3 months correlation between Krystal and Forte is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Forte Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forte Biosciences 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 Forte Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forte Biosciences has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Forte Biosciences go up and down completely randomly.

Pair Corralation between Krystal Biotech and Forte Biosciences

Given the investment horizon of 90 days Krystal Biotech is expected to generate 0.26 times more return on investment than Forte Biosciences. However, Krystal Biotech is 3.78 times less risky than Forte Biosciences. It trades about -0.11 of its potential returns per unit of risk. Forte Biosciences is currently generating about -0.08 per unit of risk. If you would invest  16,083  in Krystal Biotech on October 24, 2024 and sell it today you would lose (737.00) from holding Krystal Biotech or give up 4.58% of portfolio value over 90 days.

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

Krystal Biotech  vs.  Forte Biosciences

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.

Forte Biosciences

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Forte Biosciences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Forte Biosciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krystal Biotech and Forte Biosciences

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

The idea behind Krystal Biotech and Forte Biosciences 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 CEOs Directory module to screen CEOs from public companies around the world.