Correlation Between Apellis Pharmaceuticals and Krystal Biotech

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

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

Diversification Opportunities for Apellis Pharmaceuticals and Krystal Biotech

0.72

Correlation Coefficient

Apellis Pharmaceuticals  Krystal Biotech

Poor diversification

The 3 months correlation between Apellis and Krystal is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Apellis Pharmaceuticals and Krystal Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krystal Biotech and Apellis Pharmaceuticals 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 Apellis Pharmaceuticals are associated (or correlated) with Krystal Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Krystal Biotech has no effect on the direction of Apellis Pharmaceuticals i.e., Apellis Pharmaceuticals and Krystal Biotech go up and down completely randomly.

Pair Corralation between Apellis Pharmaceuticals and Krystal Biotech

Given the investment horizon of 90 days Apellis Pharmaceuticals is expected to generate 1.39 times more return on investment than Krystal Biotech. However, Apellis Pharmaceuticals is 1.39 times more volatile than Krystal Biotech. It trades about 0.24 of its potential returns per unit of risk. Krystal Biotech is currently generating about 0.19 per unit of risk. If you would invest  2,771  in Apellis Pharmaceuticals on August 31, 2024 and sell it today you would earn a total of  643.00  from holding Apellis Pharmaceuticals or generate 23.2% return on investment over 90 days.

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

Apellis Pharmaceuticals  vs.  Krystal Biotech

Apellis Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apellis Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Krystal Biotech

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Krystal Biotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Krystal Biotech may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Apellis Pharmaceuticals and Krystal Biotech

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

The idea behind Apellis Pharmaceuticals and Krystal 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..