Correlation Between Krystal Biotech and Monte Rosa

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

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

Diversification Opportunities for Krystal Biotech and Monte Rosa

0.23

Correlation Coefficient

Krystal Biotech  Monte Rosa

Modest diversification

The 3 months correlation between Krystal and Monte is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Monte Rosa Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Monte Rosa 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 Monte Rosa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Monte Rosa Therapeutics has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Monte Rosa go up and down completely randomly.

Pair Corralation between Krystal Biotech and Monte Rosa

Given the investment horizon of 90 days Krystal Biotech is expected to generate 12.63 times less return on investment than Monte Rosa. But when comparing it to its historical volatility, Krystal Biotech is 5.33 times less risky than Monte Rosa. It trades about 0.05 of its potential returns per unit of risk. Monte Rosa Therapeutics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  582.00  in Monte Rosa Therapeutics on September 2, 2024 and sell it today you would earn a total of  454.00  from holding Monte Rosa Therapeutics or generate 78.01% return on investment over 90 days.

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

Krystal Biotech  vs.  Monte Rosa Therapeutics

Krystal Biotech

Risk-Adjusted Performance

3 of 100

Insignificant

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 January 2025.

Monte Rosa Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Monte Rosa Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Monte Rosa exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Krystal Biotech and Monte Rosa

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

The idea behind Krystal Biotech and Monte Rosa 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.

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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.