Correlation Between PepGen and Madrigal Pharmaceuticals

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

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

Diversification Opportunities for PepGen and Madrigal Pharmaceuticals

-0.49

Correlation Coefficient

PepGen  Madrigal Pharmaceuticals

Very good diversification

The 3 months correlation between PepGen and Madrigal is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding PepGen and Madrigal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madrigal Pharmaceuticals and PepGen 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 PepGen 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 PepGen i.e., PepGen and Madrigal Pharmaceuticals go up and down completely randomly.

Pair Corralation between PepGen and Madrigal Pharmaceuticals

Given the investment horizon of 90 days PepGen is expected to under-perform the Madrigal Pharmaceuticals. In addition to that, PepGen is 3.43 times more volatile than Madrigal Pharmaceuticals. It trades about -0.04 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

PepGen  vs.  Madrigal Pharmaceuticals

PepGen

Risk-Adjusted Performance

Very Weak

Over the last 90 days PepGen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 PepGen and Madrigal Pharmaceuticals

The main advantage of trading using opposite PepGen and Madrigal Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PepGen 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 PepGen 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.