Correlation Between Madrigal Pharmaceuticals and Reata Pharmaceuticals

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

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

Diversification Opportunities for Madrigal Pharmaceuticals and Reata Pharmaceuticals

0.0

Correlation Coefficient

Madrigal Pharmaceuticals  Reata Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Madrigal and Reata is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Reata Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reata Pharmaceuticals 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 Reata Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reata Pharmaceuticals has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Reata Pharmaceuticals go up and down completely randomly.

Pair Corralation between Madrigal Pharmaceuticals and Reata Pharmaceuticals

If you would invest  31,162  in Madrigal Pharmaceuticals on December 29, 2024 and sell it today you would earn a total of  2,565  from holding Madrigal Pharmaceuticals or generate 8.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Madrigal Pharmaceuticals  vs.  Reata Pharmaceuticals

Madrigal Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 4 (%) 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.

Reata Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reata Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reata Pharmaceuticals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Madrigal Pharmaceuticals and Reata Pharmaceuticals

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

The idea behind Madrigal Pharmaceuticals and Reata 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.