Correlation Between Castle Biosciences and EXACT Sciences

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

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

Diversification Opportunities for Castle Biosciences and EXACT Sciences

0.22

Correlation Coefficient

Castle Biosciences  EXACT Sciences

Modest diversification

The 3 months correlation between Castle and EXACT is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and EXACT Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXACT Sciences and Castle Biosciences 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 Castle Biosciences are associated (or correlated) with EXACT Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXACT Sciences has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and EXACT Sciences go up and down completely randomly.

Pair Corralation between Castle Biosciences and EXACT Sciences

Given the investment horizon of 90 days Castle Biosciences is expected to generate 0.83 times more return on investment than EXACT Sciences. However, Castle Biosciences is 1.21 times less risky than EXACT Sciences. It trades about -0.02 of its potential returns per unit of risk. EXACT Sciences is currently generating about -0.04 per unit of risk. If you would invest  2,997  in Castle Biosciences on September 21, 2024 and sell it today you would lose (217.00) from holding Castle Biosciences or give up 7.24% of portfolio value over 90 days.

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

Castle Biosciences  vs.  EXACT Sciences

Castle Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Castle Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Castle Biosciences is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

EXACT Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXACT Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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 Castle Biosciences and EXACT Sciences

The main advantage of trading using opposite Castle Biosciences and EXACT Sciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Castle Biosciences position performs unexpectedly, EXACT Sciences 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 EXACT Sciences will offset losses from the drop in EXACT Sciences' long position.

The idea behind Castle Biosciences and EXACT Sciences 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.