Correlation Between Castle Biosciences and Transcode Therapeutics

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

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

Diversification Opportunities for Castle Biosciences and Transcode Therapeutics

0.23

Correlation Coefficient

Castle Biosciences  Transcode Therapeutics

Modest diversification

The 3 months correlation between Castle and Transcode is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and Transcode Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Transcode Therapeutics 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 Transcode Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Transcode Therapeutics has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and Transcode Therapeutics go up and down completely randomly.

Pair Corralation between Castle Biosciences and Transcode Therapeutics

Given the investment horizon of 90 days Castle Biosciences is expected to under-perform the Transcode Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Castle Biosciences is 3.19 times less risky than Transcode Therapeutics. The stock trades about -0.12 of its potential returns per unit of risk. The Transcode Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,181  in Transcode Therapeutics on April 27, 2025 and sell it today you would lose (21.00) from holding Transcode Therapeutics or give up 1.78% of portfolio value over 90 days.

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

Castle Biosciences  vs.  Transcode Therapeutics

Castle Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Castle Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in August 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Transcode Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Transcode Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Transcode Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castle Biosciences and Transcode Therapeutics

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

The idea behind Castle Biosciences and Transcode Therapeutics 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.