Correlation Between Natera and Castle Biosciences
Can any of the company-specific risk be diversified away by investing in both Natera 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 Natera and Castle Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natera Inc and Castle Biosciences, you can compare the effects of market volatilities on Natera 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 Natera with a short position of Castle Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natera and Castle Biosciences.
Diversification Opportunities for Natera and Castle Biosciences
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between Natera and Castle is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding Natera Inc and Castle Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Biosciences and Natera 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 Natera Inc 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 Natera i.e., Natera and Castle Biosciences go up and down completely randomly.
Pair Corralation between Natera and Castle Biosciences
Given the investment horizon of 90 days Natera Inc is expected to generate 0.62 times more return on investment than Castle Biosciences. However, Natera Inc is 1.6 times less risky than Castle Biosciences. It trades about 0.11 of its potential returns per unit of risk. Castle Biosciences is currently generating about 0.03 per unit of risk. If you would invest 4,039 in Natera Inc on August 24, 2024 and sell it today you would earn a total of 12,687 from holding Natera Inc or generate 314.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natera Inc vs. Castle Biosciences
Performance |
| Timeline |
| Natera Inc |
| Castle Biosciences |
Natera and Castle Biosciences Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natera and Castle Biosciences
The main advantage of trading using opposite Natera and Castle Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natera 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 Natera Inc 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.| 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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