Correlation Between Madrigal Pharmaceuticals and Legend Biotech
Can any of the company-specific risk be diversified away by investing in both Madrigal Pharmaceuticals and Legend Biotech 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 Legend Biotech into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madrigal Pharmaceuticals and Legend Biotech Corp, you can compare the effects of market volatilities on Madrigal Pharmaceuticals and Legend Biotech 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 Legend Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madrigal Pharmaceuticals and Legend Biotech.
Diversification Opportunities for Madrigal Pharmaceuticals and Legend Biotech
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Madrigal and Legend is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Legend Biotech Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Legend Biotech Corp 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 Legend Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Legend Biotech Corp has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Legend Biotech go up and down completely randomly.
Pair Corralation between Madrigal Pharmaceuticals and Legend Biotech
Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 2.72 times more return on investment than Legend Biotech. However, Madrigal Pharmaceuticals is 2.72 times more volatile than Legend Biotech Corp. It trades about 0.34 of its potential returns per unit of risk. Legend Biotech Corp is currently generating about -0.13 per unit of risk. If you would invest 20,248 in Madrigal Pharmaceuticals on August 24, 2024 and sell it today you would earn a total of 12,676 from holding Madrigal Pharmaceuticals or generate 62.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madrigal Pharmaceuticals vs. Legend Biotech Corp
Performance |
| Timeline |
| Madrigal Pharmaceuticals |
| Legend Biotech Corp |
Madrigal Pharmaceuticals and Legend Biotech Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madrigal Pharmaceuticals and Legend Biotech
The main advantage of trading using opposite Madrigal Pharmaceuticals and Legend Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madrigal Pharmaceuticals position performs unexpectedly, Legend Biotech 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 Legend Biotech will offset losses from the drop in Legend Biotech's long position.| Madrigal Pharmaceuticals vs. Lyra Therapeutics | Madrigal Pharmaceuticals vs. Hookipa Pharma | Madrigal Pharmaceuticals vs. Cingulate Warrants | Madrigal Pharmaceuticals vs. SAB Biotherapeutics |
| Legend Biotech vs. Lyra Therapeutics | Legend Biotech vs. Hookipa Pharma | Legend Biotech vs. Cingulate Warrants | Legend Biotech vs. SAB Biotherapeutics |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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