Correlation Between Castle Biosciences and Myriad Genetics

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

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

Diversification Opportunities for Castle Biosciences and Myriad Genetics

-0.05

Correlation Coefficient

Castle Biosciences  Myriad Genetics

Good diversification

The 3 months correlation between Castle and Myriad is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and Myriad Genetics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Myriad Genetics 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 Myriad Genetics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Myriad Genetics has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and Myriad Genetics go up and down completely randomly.

Pair Corralation between Castle Biosciences and Myriad Genetics

Given the investment horizon of 90 days Castle Biosciences is expected to generate 0.99 times more return on investment than Myriad Genetics. However, Castle Biosciences is 1.01 times less risky than Myriad Genetics. It trades about -0.06 of its potential returns per unit of risk. Myriad Genetics is currently generating about -0.33 per unit of risk. If you would invest  3,147  in Castle Biosciences on September 20, 2024 and sell it today you would lose (442.00) from holding Castle Biosciences or give up 14.05% of portfolio value over 90 days.

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

Castle Biosciences  vs.  Myriad Genetics

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Myriad Genetics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Castle Biosciences and Myriad Genetics

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

The idea behind Castle Biosciences and Myriad Genetics 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.