Correlation Between Castle Biosciences and IQVIA Holdings

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

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

Diversification Opportunities for Castle Biosciences and IQVIA Holdings

0.25

Correlation Coefficient

Castle Biosciences  IQVIA Holdings

Modest diversification

The 3 months correlation between Castle and IQVIA is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and IQVIA Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IQVIA Holdings 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 IQVIA Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IQVIA Holdings has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and IQVIA Holdings go up and down completely randomly.

Pair Corralation between Castle Biosciences and IQVIA Holdings

Given the investment horizon of 90 days Castle Biosciences is expected to under-perform the IQVIA Holdings. In addition to that, Castle Biosciences is 1.83 times more volatile than IQVIA Holdings. It trades about -0.11 of its total potential returns per unit of risk. IQVIA Holdings is currently generating about -0.06 per unit of volatility. If you would invest  20,402  in IQVIA Holdings on September 25, 2024 and sell it today you would lose (394.00) from holding IQVIA Holdings or give up 1.93% 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.  IQVIA Holdings

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.

IQVIA Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IQVIA Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Castle Biosciences and IQVIA Holdings

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

The idea behind Castle Biosciences and IQVIA Holdings 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.