Correlation Between Illumina and Castle Biosciences
Can any of the company-specific risk be diversified away by investing in both Illumina 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 Illumina and Castle Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Illumina and Castle Biosciences, you can compare the effects of market volatilities on Illumina 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 Illumina with a short position of Castle Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Illumina and Castle Biosciences.
Diversification Opportunities for Illumina and Castle Biosciences
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Illumina and Castle is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Illumina and Castle Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Biosciences and Illumina 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 Illumina 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 Illumina i.e., Illumina and Castle Biosciences go up and down completely randomly.
Pair Corralation between Illumina and Castle Biosciences
Given the investment horizon of 90 days Illumina is expected to generate 0.72 times more return on investment than Castle Biosciences. However, Illumina is 1.38 times less risky than Castle Biosciences. It trades about 0.01 of its potential returns per unit of risk. Castle Biosciences is currently generating about -0.11 per unit of risk. If you would invest 14,403 in Illumina on August 28, 2024 and sell it today you would lose (21.00) from holding Illumina or give up 0.15% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Illumina vs. Castle Biosciences
Performance |
| Timeline |
| Illumina |
| Castle Biosciences |
Illumina and Castle Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Illumina and Castle Biosciences
The main advantage of trading using opposite Illumina and Castle Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Illumina 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.| Illumina vs. Fonar | Illumina vs. Burning Rock Biotech | Illumina vs. Sera Prognostics | Illumina vs. Exagen Inc |
| Castle Biosciences vs. Caredx Inc | Castle Biosciences vs. Twist Bioscience Corp | Castle Biosciences vs. Biodesix | Castle Biosciences vs. Natera Inc |
Check out your portfolio center.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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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