Correlation Between Legend Biotech and Krystal Biotech

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

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

Diversification Opportunities for Legend Biotech and Krystal Biotech

0.87

Correlation Coefficient

Legend Biotech  Krystal Biotech

Very poor diversification

The 3 months correlation between Legend and Krystal is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Legend Biotech Corp and Krystal Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krystal Biotech and Legend 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 Legend Biotech Corp 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 Legend Biotech i.e., Legend Biotech and Krystal Biotech go up and down completely randomly.

Pair Corralation between Legend Biotech and Krystal Biotech

Given the investment horizon of 90 days Legend Biotech Corp is expected to generate 1.23 times more return on investment than Krystal Biotech. However, Legend Biotech is 1.23 times more volatile than Krystal Biotech. It trades about 0.12 of its potential returns per unit of risk. Krystal Biotech is currently generating about 0.0 per unit of risk. If you would invest  3,137  in Legend Biotech Corp on May 6, 2025 and sell it today you would earn a total of  735.00  from holding Legend Biotech Corp or generate 23.43% return on investment over 90 days.

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

Legend Biotech Corp  vs.  Krystal Biotech

Legend Biotech Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Legend Biotech Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Legend Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Krystal Biotech

Risk-Adjusted Performance

OK

Over the last 90 days Krystal Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Krystal Biotech is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Legend Biotech and Krystal Biotech

The main advantage of trading using opposite Legend Biotech and Krystal Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend Biotech 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 Legend Biotech Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.