Correlation Between Johnson Johnson and Castle Biosciences
Can any of the company-specific risk be diversified away by investing in both Johnson Johnson 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 Johnson Johnson and Castle Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Johnson Johnson and Castle Biosciences, you can compare the effects of market volatilities on Johnson Johnson 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 Johnson Johnson with a short position of Castle Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Johnson Johnson and Castle Biosciences.
Diversification Opportunities for Johnson Johnson and Castle Biosciences
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Johnson and Castle is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Johnson Johnson and Castle Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Castle Biosciences and Johnson Johnson 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 Johnson Johnson 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 Johnson Johnson i.e., Johnson Johnson and Castle Biosciences go up and down completely randomly.
Pair Corralation between Johnson Johnson and Castle Biosciences
Considering the 90-day investment horizon Johnson Johnson is expected to generate 9.71 times less return on investment than Castle Biosciences. But when comparing it to its historical volatility, Johnson Johnson is 4.35 times less risky than Castle Biosciences. It trades about 0.1 of its potential returns per unit of risk. Castle Biosciences is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 1,985 in Castle Biosciences on July 24, 2024 and sell it today you would earn a total of 1,241 from holding Castle Biosciences or generate 62.52% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Johnson Johnson vs. Castle Biosciences
Performance |
Timeline |
Johnson Johnson |
Castle Biosciences |
Johnson Johnson and Castle Biosciences Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Johnson Johnson and Castle Biosciences
The main advantage of trading using opposite Johnson Johnson and Castle Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Johnson Johnson 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.Johnson Johnson vs. Merck Company | Johnson Johnson vs. Bristol Myers Squibb | Johnson Johnson vs. Amgen Inc | Johnson Johnson vs. Pfizer 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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