Correlation Between Madrigal Pharmaceuticals and Xencor

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

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

Diversification Opportunities for Madrigal Pharmaceuticals and Xencor

0.81

Correlation Coefficient

Madrigal Pharmaceuticals  Xencor

Very poor diversification

The 3 months correlation between Madrigal and Xencor is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Xencor Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xencor Inc 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 Xencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xencor Inc has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Xencor go up and down completely randomly.

Pair Corralation between Madrigal Pharmaceuticals and Xencor

Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 2.37 times less return on investment than Xencor. In addition to that, Madrigal Pharmaceuticals is 1.11 times more volatile than Xencor Inc. It trades about 0.03 of its total potential returns per unit of risk. Xencor Inc is currently generating about 0.08 per unit of volatility. If you would invest  1,818  in Xencor Inc on October 4, 2024 and sell it today you would earn a total of  564.00  from holding Xencor Inc or generate 31.02% return on investment over 90 days.

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

Madrigal Pharmaceuticals  vs.  Xencor Inc

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.

Xencor Inc

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xencor Inc are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak fundamental indicators, Xencor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Madrigal Pharmaceuticals and Xencor

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

The idea behind Madrigal Pharmaceuticals and Xencor Inc 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.

Check out your portfolio center.

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 CEOs Directory module to screen CEOs from public companies around the world.