Correlation Between Roivant Sciences and Krystal Biotech

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

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

Diversification Opportunities for Roivant Sciences and Krystal Biotech

0.59

Correlation Coefficient

Roivant Sciences  Krystal Biotech

Very weak diversification

The 3 months correlation between Roivant and Krystal is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Roivant Sciences and Krystal Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krystal Biotech and Roivant Sciences 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 Roivant Sciences 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 Roivant Sciences i.e., Roivant Sciences and Krystal Biotech go up and down completely randomly.

Pair Corralation between Roivant Sciences and Krystal Biotech

Given the investment horizon of 90 days Roivant Sciences is expected to generate 0.65 times more return on investment than Krystal Biotech. However, Roivant Sciences is 1.55 times less risky than Krystal Biotech. It trades about -0.02 of its potential returns per unit of risk. Krystal Biotech is currently generating about -0.04 per unit of risk. If you would invest  1,190  in Roivant Sciences on September 22, 2024 and sell it today you would lose (33.00) from holding Roivant Sciences or give up 2.77% of portfolio value over 90 days.

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

Roivant Sciences  vs.  Krystal Biotech

Roivant Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roivant Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Roivant Sciences is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated 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 Roivant Sciences and Krystal Biotech

The main advantage of trading using opposite Roivant Sciences and Krystal Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roivant Sciences 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 Roivant Sciences 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.