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

0.86

Correlation Coefficient

Castle Biosciences  EXACT Sciences

Very poor diversification

The 3 months correlation between Castle and EXACT is 0.86. 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 under-perform the EXACT Sciences. In addition to that, Castle Biosciences is 1.52 times more volatile than EXACT Sciences. It trades about -0.1 of its total potential returns per unit of risk. EXACT Sciences is currently generating about -0.15 per unit of volatility. If you would invest  5,620  in EXACT Sciences on December 28, 2024 and sell it today you would lose (1,254) from holding EXACT Sciences or give up 22.31% of portfolio value over 90 days.

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

Castle Biosciences  vs.  EXACT Sciences

Castle Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Castle Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

EXACT Sciences

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing 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 CEOs Directory module to screen CEOs from public companies around the world.