Correlation Between Arcellx and Madrigal Pharmaceuticals

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

By analyzing existing cross correlation between Arcellx and Madrigal Pharmaceuticals, you can compare the effects of market volatilities on Arcellx and Madrigal Pharmaceuticals 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 Arcellx with a short position of Madrigal Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arcellx and Madrigal Pharmaceuticals.

Diversification Opportunities for Arcellx and Madrigal Pharmaceuticals

0.45

Correlation Coefficient

Arcellx  Madrigal Pharmaceuticals

Very weak diversification

The 3 months correlation between Arcellx and Madrigal is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Arcellx and Madrigal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madrigal Pharmaceuticals and Arcellx 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 Arcellx are associated (or correlated) with Madrigal Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madrigal Pharmaceuticals has no effect on the direction of Arcellx i.e., Arcellx and Madrigal Pharmaceuticals go up and down completely randomly.

Pair Corralation between Arcellx and Madrigal Pharmaceuticals

Given the investment horizon of 90 days Arcellx is expected to generate 1.21 times less return on investment than Madrigal Pharmaceuticals. But when comparing it to its historical volatility, Arcellx is 1.45 times less risky than Madrigal Pharmaceuticals. It trades about 0.16 of its potential returns per unit of risk. Madrigal Pharmaceuticals is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  23,640  in Madrigal Pharmaceuticals on August 31, 2024 and sell it today you would earn a total of  9,238  from holding Madrigal Pharmaceuticals or generate 39.08% return on investment over 90 days.

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

Arcellx  vs.  Madrigal Pharmaceuticals

Arcellx

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Arcellx are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Arcellx showed solid returns over the last few months and may actually be approaching a breakup point.

Madrigal Pharmaceuticals

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Madrigal Pharmaceuticals disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arcellx and Madrigal Pharmaceuticals

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

The idea behind Arcellx and Madrigal Pharmaceuticals 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 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.