Correlation Between Madrigal Pharmaceuticals and Arcellx

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

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

Diversification Opportunities for Madrigal Pharmaceuticals and Arcellx

-0.13

Correlation Coefficient

Madrigal Pharmaceuticals  Arcellx

Good diversification

The 3 months correlation between Madrigal and Arcellx is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Arcellx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcellx and Madrigal Pharmaceuticals 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 Madrigal Pharmaceuticals are associated (or correlated) with Arcellx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcellx has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Arcellx go up and down completely randomly.

Pair Corralation between Madrigal Pharmaceuticals and Arcellx

Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 1.25 times more return on investment than Arcellx. However, Madrigal Pharmaceuticals is 1.25 times more volatile than Arcellx. It trades about 0.03 of its potential returns per unit of risk. Arcellx is currently generating about -0.17 per unit of risk. If you would invest  32,819  in Madrigal Pharmaceuticals on November 29, 2024 and sell it today you would earn a total of  755.00  from holding Madrigal Pharmaceuticals or generate 2.3% return on investment over 90 days.

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

Madrigal Pharmaceuticals  vs.  Arcellx

Madrigal Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain technical and fundamental indicators, Madrigal Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Arcellx

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arcellx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Madrigal Pharmaceuticals and Arcellx

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

The idea behind Madrigal Pharmaceuticals and Arcellx 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.