Correlation Between DarioHealth Corp and Castle Biosciences

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

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

Diversification Opportunities for DarioHealth Corp and Castle Biosciences

0.21

Correlation Coefficient

DarioHealth Corp  Castle Biosciences

Modest diversification

The 3 months correlation between DarioHealth and Castle is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding DarioHealth Corp and Castle Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Biosciences and DarioHealth Corp 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 DarioHealth Corp are associated (or correlated) with Castle Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castle Biosciences has no effect on the direction of DarioHealth Corp i.e., DarioHealth Corp and Castle Biosciences go up and down completely randomly.

Pair Corralation between DarioHealth Corp and Castle Biosciences

Given the investment horizon of 90 days DarioHealth Corp is expected to generate 1.77 times less return on investment than Castle Biosciences. In addition to that, DarioHealth Corp is 1.65 times more volatile than Castle Biosciences. It trades about 0.01 of its total potential returns per unit of risk. Castle Biosciences is currently generating about 0.03 per unit of volatility. If you would invest  2,918  in Castle Biosciences on September 3, 2024 and sell it today you would earn a total of  110.00  from holding Castle Biosciences or generate 3.77% return on investment over 90 days.

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

DarioHealth Corp  vs.  Castle Biosciences

DarioHealth Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DarioHealth Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, DarioHealth Corp is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Castle Biosciences

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Castle Biosciences are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Castle Biosciences may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with DarioHealth Corp and Castle Biosciences

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

The idea behind DarioHealth Corp and Castle Biosciences 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.