Correlation Between Cardiff Oncology and Madrigal Pharmaceuticals

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

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

Diversification Opportunities for Cardiff Oncology and Madrigal Pharmaceuticals

0.32

Correlation Coefficient

Cardiff Oncology  Madrigal Pharmaceuticals

Weak diversification

The 3 months correlation between Cardiff and Madrigal is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cardiff Oncology and Madrigal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madrigal Pharmaceuticals and Cardiff Oncology 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 Cardiff Oncology 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 Cardiff Oncology i.e., Cardiff Oncology and Madrigal Pharmaceuticals go up and down completely randomly.

Pair Corralation between Cardiff Oncology and Madrigal Pharmaceuticals

Given the investment horizon of 90 days Cardiff Oncology is expected to generate 1.92 times more return on investment than Madrigal Pharmaceuticals. However, Cardiff Oncology is 1.92 times more volatile than Madrigal Pharmaceuticals. It trades about 0.1 of its potential returns per unit of risk. Madrigal Pharmaceuticals is currently generating about 0.1 per unit of risk. If you would invest  271.00  in Cardiff Oncology on September 13, 2024 and sell it today you would earn a total of  107.00  from holding Cardiff Oncology or generate 39.48% return on investment over 90 days.

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

Cardiff Oncology  vs.  Madrigal Pharmaceuticals

Cardiff Oncology

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cardiff Oncology are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Cardiff Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

Madrigal Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent 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 Cardiff Oncology and Madrigal Pharmaceuticals

The main advantage of trading using opposite Cardiff Oncology and Madrigal Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cardiff Oncology 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 Cardiff Oncology 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.