Correlation Between Madrigal Pharmaceuticals and Oncolytics Biotech

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Can any of the company-specific risk be diversified away by investing in both Madrigal Pharmaceuticals and Oncolytics 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 Oncolytics 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 Oncolytics Biotech, you can compare the effects of market volatilities on Madrigal Pharmaceuticals and Oncolytics 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 Oncolytics Biotech. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madrigal Pharmaceuticals and Oncolytics Biotech.

Diversification Opportunities for Madrigal Pharmaceuticals and Oncolytics Biotech

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Madrigal and Oncolytics is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Oncolytics Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oncolytics Biotech 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 Oncolytics Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oncolytics Biotech has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Oncolytics Biotech go up and down completely randomly.

Pair Corralation between Madrigal Pharmaceuticals and Oncolytics Biotech

Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 2.63 times more return on investment than Oncolytics Biotech. However, Madrigal Pharmaceuticals is 2.63 times more volatile than Oncolytics Biotech. It trades about 0.05 of its potential returns per unit of risk. Oncolytics Biotech is currently generating about -0.01 per unit of risk. If you would invest  6,290  in Madrigal Pharmaceuticals on September 5, 2024 and sell it today you would earn a total of  25,558  from holding Madrigal Pharmaceuticals or generate 406.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Madrigal Pharmaceuticals  vs.  Oncolytics Biotech

 Performance 
       Timeline  
Madrigal Pharmaceuticals 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting technical and fundamental indicators, Madrigal Pharmaceuticals disclosed solid returns over the last few months and may actually be approaching a breakup point.
Oncolytics Biotech 

Risk-Adjusted Performance

0 of 100

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

Madrigal Pharmaceuticals and Oncolytics Biotech Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Madrigal Pharmaceuticals and Oncolytics Biotech

The main advantage of trading using opposite Madrigal Pharmaceuticals and Oncolytics Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madrigal Pharmaceuticals position performs unexpectedly, Oncolytics 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 Oncolytics Biotech will offset losses from the drop in Oncolytics Biotech's long position.
The idea behind Madrigal Pharmaceuticals and Oncolytics Biotech 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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