Correlation Between Castle Biosciences and Neuronetics

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

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

Diversification Opportunities for Castle Biosciences and Neuronetics

-0.68

Correlation Coefficient

Castle Biosciences  Neuronetics

Excellent diversification

The 3 months correlation between Castle and Neuronetics is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and Neuronetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Neuronetics 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 Neuronetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Neuronetics has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and Neuronetics go up and down completely randomly.

Pair Corralation between Castle Biosciences and Neuronetics

Given the investment horizon of 90 days Castle Biosciences is expected to under-perform the Neuronetics. But the stock apears to be less risky and, when comparing its historical volatility, Castle Biosciences is 2.44 times less risky than Neuronetics. The stock trades about -0.1 of its potential returns per unit of risk. The Neuronetics is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Neuronetics on December 30, 2024 and sell it today you would earn a total of  229.00  from holding Neuronetics or generate 154.73% return on investment over 90 days.

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

Castle Biosciences  vs.  Neuronetics

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.

Neuronetics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Neuronetics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Neuronetics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castle Biosciences and Neuronetics

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

The idea behind Castle Biosciences and Neuronetics 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.