Correlation Between Madrigal Pharmaceuticals and Caribou Biosciences

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Can any of the company-specific risk be diversified away by investing in both Madrigal Pharmaceuticals and Caribou Biosciences 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 Caribou Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madrigal Pharmaceuticals and Caribou Biosciences, you can compare the effects of market volatilities on Madrigal Pharmaceuticals and Caribou Biosciences 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 Caribou Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madrigal Pharmaceuticals and Caribou Biosciences.

Diversification Opportunities for Madrigal Pharmaceuticals and Caribou Biosciences

-0.2
  Correlation Coefficient

Good diversification

The 3 months correlation between Madrigal and Caribou is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Caribou Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribou Biosciences 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 Caribou Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribou Biosciences has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Caribou Biosciences go up and down completely randomly.

Pair Corralation between Madrigal Pharmaceuticals and Caribou Biosciences

Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 0.7 times more return on investment than Caribou Biosciences. However, Madrigal Pharmaceuticals is 1.43 times less risky than Caribou Biosciences. It trades about 0.04 of its potential returns per unit of risk. Caribou Biosciences is currently generating about -0.02 per unit of risk. If you would invest  24,533  in Madrigal Pharmaceuticals on November 28, 2024 and sell it today you would earn a total of  12,594  from holding Madrigal Pharmaceuticals or generate 51.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Madrigal Pharmaceuticals  vs.  Caribou Biosciences

 Performance 
       Timeline  
Madrigal Pharmaceuticals 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Madrigal Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, Madrigal Pharmaceuticals is not utilizing all of its potentials. The newest stock price mess, may contribute to short-term losses for the institutional investors.
Caribou Biosciences 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Caribou Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Madrigal Pharmaceuticals and Caribou Biosciences Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Madrigal Pharmaceuticals and Caribou Biosciences

The main advantage of trading using opposite Madrigal Pharmaceuticals and Caribou Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madrigal Pharmaceuticals position performs unexpectedly, Caribou Biosciences 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 Caribou Biosciences will offset losses from the drop in Caribou Biosciences' long position.
The idea behind Madrigal Pharmaceuticals and Caribou Biosciences 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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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