Correlation Between Madrigal Pharmaceuticals and Newlake Capital

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

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

Diversification Opportunities for Madrigal Pharmaceuticals and Newlake Capital

-0.71

Correlation Coefficient

Madrigal Pharmaceuticals  Newlake Capital

Pay attention - limited upside

The 3 months correlation between Madrigal and Newlake is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Newlake Capital Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newlake Capital Partners 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 Newlake Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newlake Capital Partners has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Newlake Capital go up and down completely randomly.

Pair Corralation between Madrigal Pharmaceuticals and Newlake Capital

Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 2.45 times more return on investment than Newlake Capital. However, Madrigal Pharmaceuticals is 2.45 times more volatile than Newlake Capital Partners. It trades about 0.09 of its potential returns per unit of risk. Newlake Capital Partners is currently generating about 0.09 per unit of risk. If you would invest  14,600  in Madrigal Pharmaceuticals on October 8, 2024 and sell it today you would earn a total of  17,369  from holding Madrigal Pharmaceuticals or generate 118.97% return on investment over 90 days.

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

Madrigal Pharmaceuticals  vs.  Newlake Capital Partners

Madrigal Pharmaceuticals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 12 (%) 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.

Newlake Capital Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newlake Capital Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Madrigal Pharmaceuticals and Newlake Capital

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

The idea behind Madrigal Pharmaceuticals and Newlake Capital Partners 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.