Correlation Between Castle Biosciences and JMD Properties

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

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

Diversification Opportunities for Castle Biosciences and JMD Properties

0.06

Correlation Coefficient

Castle Biosciences  JMD Properties

Significant diversification

The 3 months correlation between Castle and JMD is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Castle Biosciences and JMD Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JMD Properties 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 JMD Properties. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JMD Properties has no effect on the direction of Castle Biosciences i.e., Castle Biosciences and JMD Properties go up and down completely randomly.

Pair Corralation between Castle Biosciences and JMD Properties

Given the investment horizon of 90 days Castle Biosciences is expected to generate 6.56 times less return on investment than JMD Properties. But when comparing it to its historical volatility, Castle Biosciences is 4.66 times less risky than JMD Properties. It trades about 0.04 of its potential returns per unit of risk. JMD Properties is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  65.00  in JMD Properties on February 4, 2024 and sell it today you would lose (59.80) from holding JMD Properties or give up 92.0% of portfolio value over 90 days.

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

Castle Biosciences  vs.  JMD Properties

Castle Biosciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Castle Biosciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Castle Biosciences may actually be approaching a critical reversion point that can send shares even higher in June 2024.

JMD Properties

Risk-Adjusted Performance

2 of 100

Very Weak

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

Pair Trading with Castle Biosciences and JMD Properties

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

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