Correlation Between Insmed and Krystal Biotech

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

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

Diversification Opportunities for Insmed and Krystal Biotech

0.38

Correlation Coefficient

Insmed  Krystal Biotech

Weak diversification

The 3 months correlation between Insmed and Krystal is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Insmed Inc and Krystal Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krystal Biotech and Insmed 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 Insmed Inc 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 Insmed i.e., Insmed and Krystal Biotech go up and down completely randomly.

Pair Corralation between Insmed and Krystal Biotech

Given the investment horizon of 90 days Insmed Inc is expected to generate 0.69 times more return on investment than Krystal Biotech. However, Insmed Inc is 1.45 times less risky than Krystal Biotech. It trades about -0.09 of its potential returns per unit of risk. Krystal Biotech is currently generating about -0.27 per unit of risk. If you would invest  7,409  in Insmed Inc on September 24, 2024 and sell it today you would lose (350.00) from holding Insmed Inc or give up 4.72% of portfolio value over 90 days.

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

Insmed Inc  vs.  Krystal Biotech

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.

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 unsteady 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.

Pair Trading with Insmed and Krystal Biotech

The main advantage of trading using opposite Insmed and Krystal Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Insmed 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 Insmed Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.