Correlation Between Castle Biosciences and Opko Health

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

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

Diversification Opportunities for Castle Biosciences and Opko Health

0.1

Correlation Coefficient

Castle Biosciences  Opko Health

Average diversification

The 3 months correlation between Castle and Opko is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and Opko Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opko Health 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 Opko Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opko Health has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and Opko Health go up and down completely randomly.

Pair Corralation between Castle Biosciences and Opko Health

Given the investment horizon of 90 days Castle Biosciences is expected to generate 2.58 times less return on investment than Opko Health. In addition to that, Castle Biosciences is 1.36 times more volatile than Opko Health. It trades about 0.04 of its total potential returns per unit of risk. Opko Health is currently generating about 0.13 per unit of volatility. If you would invest  103.00  in Opko Health on February 14, 2024 and sell it today you would earn a total of  27.00  from holding Opko Health or generate 26.21% return on investment over 90 days.

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

Castle Biosciences  vs.  Opko Health

Castle Biosciences

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Castle Biosciences are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Castle Biosciences may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Opko Health

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Opko Health are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Opko Health disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Castle Biosciences and Opko Health

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

The idea behind Castle Biosciences and Opko Health 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.

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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.