Correlation Between Castle Biosciences and ISpecimen

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

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

Diversification Opportunities for Castle Biosciences and ISpecimen

0.79

Correlation Coefficient

Castle Biosciences  ISpecimen

Poor diversification

The 3 months correlation between Castle and ISpecimen is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and iSpecimen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iSpecimen 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 ISpecimen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iSpecimen has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and ISpecimen go up and down completely randomly.

Pair Corralation between Castle Biosciences and ISpecimen

Given the investment horizon of 90 days Castle Biosciences is expected to generate 0.6 times more return on investment than ISpecimen. However, Castle Biosciences is 1.66 times less risky than ISpecimen. It trades about -0.1 of its potential returns per unit of risk. iSpecimen is currently generating about -0.19 per unit of risk. If you would invest  2,666  in Castle Biosciences on December 30, 2024 and sell it today you would lose (672.00) from holding Castle Biosciences or give up 25.21% of portfolio value over 90 days.

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

Castle Biosciences  vs.  iSpecimen

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.

iSpecimen

Risk-Adjusted Performance

Very Weak

Over the last 90 days iSpecimen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Castle Biosciences and ISpecimen

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

The idea behind Castle Biosciences and iSpecimen 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.