Correlation Between Madrigal Pharmaceuticals and Ocular Therapeutix

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

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

Diversification Opportunities for Madrigal Pharmaceuticals and Ocular Therapeutix

-0.33

Correlation Coefficient

Madrigal Pharmaceuticals  Ocular Therapeutix

Very good diversification

The 3 months correlation between Madrigal and Ocular is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Ocular Therapeutix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocular Therapeutix 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 Ocular Therapeutix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocular Therapeutix has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Ocular Therapeutix go up and down completely randomly.

Pair Corralation between Madrigal Pharmaceuticals and Ocular Therapeutix

Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 0.73 times more return on investment than Ocular Therapeutix. However, Madrigal Pharmaceuticals is 1.36 times less risky than Ocular Therapeutix. It trades about 0.03 of its potential returns per unit of risk. Ocular Therapeutix is currently generating about -0.08 per unit of risk. If you would invest  31,844  in Madrigal Pharmaceuticals on October 9, 2024 and sell it today you would earn a total of  237.00  from holding Madrigal Pharmaceuticals or generate 0.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Madrigal Pharmaceuticals  vs.  Ocular Therapeutix

Madrigal Pharmaceuticals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 13 (%) 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.

Ocular Therapeutix

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocular Therapeutix has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Ocular Therapeutix is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Madrigal Pharmaceuticals and Ocular Therapeutix

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

The idea behind Madrigal Pharmaceuticals and Ocular Therapeutix 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.