Correlation Between Castle Biosciences and Legend Biotech

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

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

Diversification Opportunities for Castle Biosciences and Legend Biotech

0.22

Correlation Coefficient

Castle Biosciences  Legend Biotech

Modest diversification

The 3 months correlation between Castle and Legend is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and Legend Biotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Biotech Corp 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 Legend Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Biotech Corp has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and Legend Biotech go up and down completely randomly.

Pair Corralation between Castle Biosciences and Legend Biotech

Given the investment horizon of 90 days Castle Biosciences is expected to generate 1.32 times less return on investment than Legend Biotech. In addition to that, Castle Biosciences is 1.57 times more volatile than Legend Biotech Corp. It trades about 0.07 of its total potential returns per unit of risk. Legend Biotech Corp is currently generating about 0.15 per unit of volatility. If you would invest  2,780  in Legend Biotech Corp on May 14, 2025 and sell it today you would earn a total of  844.00  from holding Legend Biotech Corp or generate 30.36% return on investment over 90 days.

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

Castle Biosciences  vs.  Legend Biotech Corp

Castle Biosciences

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Castle Biosciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Castle Biosciences disclosed solid returns over the last few months and may actually be approaching a breakup point.

Legend Biotech Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Legend Biotech Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Legend Biotech displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castle Biosciences and Legend Biotech

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

The idea behind Castle Biosciences and Legend Biotech Corp 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..