Correlation Between Gain Therapeutics and Castle Biosciences

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

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

Diversification Opportunities for Gain Therapeutics and Castle Biosciences

0.64

Correlation Coefficient

Gain Therapeutics  Castle Biosciences

Poor diversification

The 3 months correlation between Gain and Castle is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Gain Therapeutics and Castle Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Biosciences and Gain Therapeutics 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 Gain Therapeutics 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 Gain Therapeutics i.e., Gain Therapeutics and Castle Biosciences go up and down completely randomly.

Pair Corralation between Gain Therapeutics and Castle Biosciences

Given the investment horizon of 90 days Gain Therapeutics is expected to generate 2.23 times more return on investment than Castle Biosciences. However, Gain Therapeutics is 2.23 times more volatile than Castle Biosciences. It trades about 0.16 of its potential returns per unit of risk. Castle Biosciences is currently generating about 0.03 per unit of risk. If you would invest  104.00  in Gain Therapeutics on September 2, 2024 and sell it today you would earn a total of  82.00  from holding Gain Therapeutics or generate 78.85% return on investment over 90 days.

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

Gain Therapeutics  vs.  Castle Biosciences

Gain Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Gain Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Gain Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

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 Gain Therapeutics and Castle Biosciences

The main advantage of trading using opposite Gain Therapeutics and Castle Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gain Therapeutics 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 Gain Therapeutics 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.