Correlation Between Krystal Biotech and Viracta Therapeutics

Can any of the company-specific risk be diversified away by investing in both Krystal Biotech and Viracta 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 Viracta 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 Viracta Therapeutics, you can compare the effects of market volatilities on Krystal Biotech and Viracta 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 Viracta Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krystal Biotech and Viracta Therapeutics.

Diversification Opportunities for Krystal Biotech and Viracta Therapeutics

-0.42

Correlation Coefficient

Krystal Biotech  Viracta Therapeutics

Very good diversification

The 3 months correlation between Krystal and Viracta is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Viracta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viracta 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 Viracta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viracta Therapeutics has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Viracta Therapeutics go up and down completely randomly.

Pair Corralation between Krystal Biotech and Viracta Therapeutics

Given the investment horizon of 90 days Krystal Biotech is expected to under-perform the Viracta Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Krystal Biotech is 2.75 times less risky than Viracta Therapeutics. The stock trades about -0.03 of its potential returns per unit of risk. The Viracta Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Viracta Therapeutics on October 10, 2024 and sell it today you would lose (2.00) from holding Viracta Therapeutics or give up 8.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Krystal Biotech  vs.  Viracta 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.

Viracta Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Viracta Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Viracta Therapeutics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Krystal Biotech and Viracta Therapeutics

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

The idea behind Krystal Biotech and Viracta 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.