Correlation Between Castle Biosciences and Adaptive Biotechnologies

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

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

Diversification Opportunities for Castle Biosciences and Adaptive Biotechnologies

-0.11

Correlation Coefficient

Castle Biosciences  Adaptive Biotechnologies

Good diversification

The 3 months correlation between Castle and Adaptive is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and Adaptive Biotechnologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaptive Biotechnologies 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 Adaptive Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaptive Biotechnologies has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and Adaptive Biotechnologies go up and down completely randomly.

Pair Corralation between Castle Biosciences and Adaptive Biotechnologies

Given the investment horizon of 90 days Castle Biosciences is expected to generate 0.75 times more return on investment than Adaptive Biotechnologies. However, Castle Biosciences is 1.33 times less risky than Adaptive Biotechnologies. It trades about 0.06 of its potential returns per unit of risk. Adaptive Biotechnologies Corp is currently generating about 0.04 per unit of risk. If you would invest  1,643  in Castle Biosciences on September 26, 2024 and sell it today you would earn a total of  1,105  from holding Castle Biosciences or generate 67.26% return on investment over 90 days.

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

Castle Biosciences  vs.  Adaptive Biotechnologies Corp

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Adaptive Biotechnologies

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adaptive Biotechnologies Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Adaptive Biotechnologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castle Biosciences and Adaptive Biotechnologies

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

The idea behind Castle Biosciences and Adaptive Biotechnologies Corp 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.