Correlation Between MeiraGTx Holdings and Krystal Biotech

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

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

Diversification Opportunities for MeiraGTx Holdings and Krystal Biotech

-0.1

Correlation Coefficient

MeiraGTx Holdings  Krystal Biotech

Good diversification

The 3 months correlation between MeiraGTx and Krystal is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding MeiraGTx Holdings PLC and Krystal Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Krystal Biotech and MeiraGTx Holdings 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 MeiraGTx Holdings PLC 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 MeiraGTx Holdings i.e., MeiraGTx Holdings and Krystal Biotech go up and down completely randomly.

Pair Corralation between MeiraGTx Holdings and Krystal Biotech

Given the investment horizon of 90 days MeiraGTx Holdings PLC is expected to generate 1.58 times more return on investment than Krystal Biotech. However, MeiraGTx Holdings is 1.58 times more volatile than Krystal Biotech. It trades about 0.24 of its potential returns per unit of risk. Krystal Biotech is currently generating about 0.05 per unit of risk. If you would invest  391.00  in MeiraGTx Holdings PLC on August 31, 2024 and sell it today you would earn a total of  264.00  from holding MeiraGTx Holdings PLC or generate 67.52% return on investment over 90 days.

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

MeiraGTx Holdings PLC  vs.  Krystal Biotech

MeiraGTx Holdings PLC

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in MeiraGTx Holdings PLC are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, MeiraGTx Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

Krystal Biotech

Risk-Adjusted Performance

3 of 100

Weak

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 December 2024.

Pair Trading with MeiraGTx Holdings and Krystal Biotech

The main advantage of trading using opposite MeiraGTx Holdings and Krystal Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MeiraGTx Holdings 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 MeiraGTx Holdings PLC 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.