Correlation Between T2 Biosystms and Castle Biosciences

Can any of the company-specific risk be diversified away by investing in both T2 Biosystms 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 T2 Biosystms and Castle Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between T2 Biosystms and Castle Biosciences, you can compare the effects of market volatilities on T2 Biosystms 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 T2 Biosystms with a short position of Castle Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of T2 Biosystms and Castle Biosciences.

Diversification Opportunities for T2 Biosystms and Castle Biosciences

0.57

Correlation Coefficient

T2 Biosystms  Castle Biosciences

Very weak diversification

The 3 months correlation between TTOO and Castle is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding T2 Biosystms and Castle Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Biosciences and T2 Biosystms 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 T2 Biosystms 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 T2 Biosystms i.e., T2 Biosystms and Castle Biosciences go up and down completely randomly.

Pair Corralation between T2 Biosystms and Castle Biosciences

Given the investment horizon of 90 days T2 Biosystms is expected to under-perform the Castle Biosciences. In addition to that, T2 Biosystms is 2.95 times more volatile than Castle Biosciences. It trades about -0.14 of its total potential returns per unit of risk. Castle Biosciences is currently generating about -0.16 per unit of volatility. If you would invest  3,091  in Castle Biosciences on October 8, 2024 and sell it today you would lose (230.00) from holding Castle Biosciences or give up 7.44% of portfolio value over 90 days.

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

T2 Biosystms  vs.  Castle Biosciences

T2 Biosystms

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days T2 Biosystms has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with T2 Biosystms and Castle Biosciences

The main advantage of trading using opposite T2 Biosystms and Castle Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if T2 Biosystms 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 T2 Biosystms 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.