Correlation Between Castle Biosciences and Personalis

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

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

Diversification Opportunities for Castle Biosciences and Personalis

0.85

Correlation Coefficient

Castle Biosciences  Personalis

Very poor diversification

The 3 months correlation between Castle and Personalis is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and Personalis in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Personalis 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 Personalis. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Personalis has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and Personalis go up and down completely randomly.

Pair Corralation between Castle Biosciences and Personalis

Given the investment horizon of 90 days Castle Biosciences is expected to generate 0.65 times more return on investment than Personalis. However, Castle Biosciences is 1.54 times less risky than Personalis. It trades about -0.1 of its potential returns per unit of risk. Personalis is currently generating about -0.11 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	Strong
Accuracy	100.0%
Values	Daily Returns

Castle Biosciences  vs.  Personalis

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.

Personalis

Risk-Adjusted Performance

Very Weak

Over the last 90 days Personalis has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain 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.

Pair Trading with Castle Biosciences and Personalis

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

The idea behind Castle Biosciences and Personalis 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.