Correlation Between Karyopharm Therapeutics and Castle Biosciences

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

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

Diversification Opportunities for Karyopharm Therapeutics and Castle Biosciences

0.7

Correlation Coefficient

Karyopharm Therapeutics  Castle Biosciences

Poor diversification

The 3 months correlation between Karyopharm and Castle is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Karyopharm Therapeutics and Castle Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Biosciences and Karyopharm Therapeutics 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 Karyopharm Therapeutics are associated (or correlated) with Castle Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Castle Biosciences has no effect on the direction of Karyopharm Therapeutics i.e., Karyopharm Therapeutics and Castle Biosciences go up and down completely randomly.

Pair Corralation between Karyopharm Therapeutics and Castle Biosciences

Given the investment horizon of 90 days Karyopharm Therapeutics is expected to under-perform the Castle Biosciences. In addition to that, Karyopharm Therapeutics is 1.12 times more volatile than Castle Biosciences. It trades about -0.03 of its total potential returns per unit of risk. Castle Biosciences is currently generating about 0.03 per unit of volatility. If you would invest  2,285  in Castle Biosciences on September 26, 2024 and sell it today you would earn a total of  463.00  from holding Castle Biosciences or generate 20.26% return on investment over 90 days.

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

Karyopharm Therapeutics  vs.  Castle Biosciences

Karyopharm Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karyopharm Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

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 latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Karyopharm Therapeutics and Castle Biosciences

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

The idea behind Karyopharm Therapeutics and Castle Biosciences 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.