Correlation Between Madrigal Pharmaceuticals and Aurinia Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Madrigal Pharmaceuticals and Aurinia 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 Aurinia 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 Aurinia Pharmaceuticals, you can compare the effects of market volatilities on Madrigal Pharmaceuticals and Aurinia 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 Aurinia Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madrigal Pharmaceuticals and Aurinia Pharmaceuticals.
Diversification Opportunities for Madrigal Pharmaceuticals and Aurinia Pharmaceuticals
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Madrigal and Aurinia is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Aurinia Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aurinia 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 Aurinia Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aurinia Pharmaceuticals has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Aurinia Pharmaceuticals go up and down completely randomly.
Pair Corralation between Madrigal Pharmaceuticals and Aurinia Pharmaceuticals
Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 1.41 times less return on investment than Aurinia Pharmaceuticals. In addition to that, Madrigal Pharmaceuticals is 1.46 times more volatile than Aurinia Pharmaceuticals. It trades about 0.08 of its total potential returns per unit of risk. Aurinia Pharmaceuticals is currently generating about 0.16 per unit of volatility. If you would invest 536.00 in Aurinia Pharmaceuticals on September 1, 2024 and sell it today you would earn a total of 350.00 from holding Aurinia Pharmaceuticals or generate 65.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 99.21% |
| Values | Daily Returns |
Madrigal Pharmaceuticals vs. Aurinia Pharmaceuticals
Performance |
| Timeline |
| Madrigal Pharmaceuticals |
| Aurinia Pharmaceuticals |
Madrigal Pharmaceuticals and Aurinia Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madrigal Pharmaceuticals and Aurinia Pharmaceuticals
The main advantage of trading using opposite Madrigal Pharmaceuticals and Aurinia Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madrigal Pharmaceuticals position performs unexpectedly, Aurinia 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 Aurinia Pharmaceuticals will offset losses from the drop in Aurinia Pharmaceuticals' long position.| Madrigal Pharmaceuticals vs. TG Therapeutics | Madrigal Pharmaceuticals vs. Terns Pharmaceuticals | Madrigal Pharmaceuticals vs. Hepion Pharmaceuticals | Madrigal Pharmaceuticals vs. Viking Therapeutics |
| Aurinia Pharmaceuticals vs. Viking Therapeutics | Aurinia Pharmaceuticals vs. Axsome Therapeutics | Aurinia Pharmaceuticals vs. Madrigal Pharmaceuticals | Aurinia Pharmaceuticals vs. Seres Therapeutics |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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