Correlation Between Biomarin Pharmaceutical and Krystal Biotech

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Can any of the company-specific risk be diversified away by investing in both Biomarin Pharmaceutical 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 Biomarin Pharmaceutical and Krystal Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biomarin Pharmaceutical and Krystal Biotech, you can compare the effects of market volatilities on Biomarin Pharmaceutical 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 Biomarin Pharmaceutical with a short position of Krystal Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biomarin Pharmaceutical and Krystal Biotech.

Diversification Opportunities for Biomarin Pharmaceutical and Krystal Biotech

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Biomarin and Krystal is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Biomarin Pharmaceutical and Krystal Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krystal Biotech and Biomarin Pharmaceutical 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 Biomarin Pharmaceutical 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 Biomarin Pharmaceutical i.e., Biomarin Pharmaceutical and Krystal Biotech go up and down completely randomly.

Pair Corralation between Biomarin Pharmaceutical and Krystal Biotech

Given the investment horizon of 90 days Biomarin Pharmaceutical is expected to generate 0.76 times more return on investment than Krystal Biotech. However, Biomarin Pharmaceutical is 1.31 times less risky than Krystal Biotech. It trades about 0.07 of its potential returns per unit of risk. Krystal Biotech is currently generating about -0.01 per unit of risk. If you would invest  6,913  in Biomarin Pharmaceutical on July 23, 2024 and sell it today you would earn a total of  98.00  from holding Biomarin Pharmaceutical or generate 1.42% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Biomarin Pharmaceutical  vs.  Krystal Biotech

 Performance 
       Timeline  
Biomarin Pharmaceutical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Biomarin Pharmaceutical has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in November 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.
Krystal Biotech 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in November 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Biomarin Pharmaceutical and Krystal Biotech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Biomarin Pharmaceutical and Krystal Biotech

The main advantage of trading using opposite Biomarin Pharmaceutical and Krystal Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biomarin Pharmaceutical 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 Biomarin Pharmaceutical 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.

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