Correlation Between Krystal Biotech and Insmed

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

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

Diversification Opportunities for Krystal Biotech and Insmed

0.5

Correlation Coefficient

Krystal Biotech  Insmed

Very weak diversification

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

Pair Corralation between Krystal Biotech and Insmed

Given the investment horizon of 90 days Krystal Biotech is expected to generate 15.01 times less return on investment than Insmed. But when comparing it to its historical volatility, Krystal Biotech is 4.14 times less risky than Insmed. It trades about 0.03 of its potential returns per unit of risk. Insmed Inc is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  2,510  in Insmed Inc on September 13, 2024 and sell it today you would earn a total of  4,695  from holding Insmed Inc or generate 187.05% 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.  Insmed Inc

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Insmed Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Insmed Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Insmed is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Krystal Biotech and Insmed

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

The idea behind Krystal Biotech and Insmed Inc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.