Correlation Between Krystal Biotech and Merck
Can any of the company-specific risk be diversified away by investing in both Krystal Biotech and Merck 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 Merck into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Krystal Biotech and Merck Company, you can compare the effects of market volatilities on Krystal Biotech and Merck 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 Merck. Check out your portfolio center. Please also check ongoing floating volatility patterns of Krystal Biotech and Merck.
Diversification Opportunities for Krystal Biotech and Merck
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Krystal and Merck is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Krystal Biotech and Merck Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merck Company 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 Merck. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merck Company has no effect on the direction of Krystal Biotech i.e., Krystal Biotech and Merck go up and down completely randomly.
Pair Corralation between Krystal Biotech and Merck
Given the investment horizon of 90 days Krystal Biotech is expected to generate 1.67 times more return on investment than Merck. However, Krystal Biotech is 1.67 times more volatile than Merck Company. It trades about 0.07 of its potential returns per unit of risk. Merck Company is currently generating about -0.03 per unit of risk. If you would invest 15,581 in Krystal Biotech on November 5, 2024 and sell it today you would earn a total of 393.00 from holding Krystal Biotech or generate 2.52% 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. Merck Company
Performance |
| Timeline |
| Krystal Biotech |
| Merck Company |
Krystal Biotech and Merck Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Krystal Biotech and Merck
The main advantage of trading using opposite Krystal Biotech and Merck positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Krystal Biotech position performs unexpectedly, Merck 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 Merck will offset losses from the drop in Merck's long position.| Krystal Biotech vs. MeiraGTx Holdings PLC | Krystal Biotech vs. Apellis Pharmaceuticals | Krystal Biotech vs. Regenxbio | Krystal Biotech vs. Rhythm Pharmaceuticals |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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