Correlation Between Nkarta and Madrigal Pharmaceuticals

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

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

Diversification Opportunities for Nkarta and Madrigal Pharmaceuticals

-0.44

Correlation Coefficient

Nkarta  Madrigal Pharmaceuticals

Very good diversification

The 3 months correlation between Nkarta and Madrigal is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Nkarta Inc and Madrigal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madrigal Pharmaceuticals and Nkarta 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 Nkarta Inc are associated (or correlated) with Madrigal Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madrigal Pharmaceuticals has no effect on the direction of Nkarta i.e., Nkarta and Madrigal Pharmaceuticals go up and down completely randomly.

Pair Corralation between Nkarta and Madrigal Pharmaceuticals

Given the investment horizon of 90 days Nkarta Inc is expected to under-perform the Madrigal Pharmaceuticals. In addition to that, Nkarta is 1.65 times more volatile than Madrigal Pharmaceuticals. It trades about 0.0 of its total potential returns per unit of risk. Madrigal Pharmaceuticals is currently generating about 0.04 per unit of volatility. If you would invest  31,162  in Madrigal Pharmaceuticals on December 29, 2024 and sell it today you would earn a total of  1,625  from holding Madrigal Pharmaceuticals or generate 5.21% return on investment over 90 days.

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

Nkarta Inc  vs.  Madrigal Pharmaceuticals

Nkarta Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Nkarta is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Madrigal Pharmaceuticals

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 3 (%) 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 April 2025.

Pair Trading with Nkarta and Madrigal Pharmaceuticals

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

The idea behind Nkarta Inc and Madrigal 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.