Correlation Between Madrigal Pharmaceuticals and Stoke Therapeutics
Can any of the company-specific risk be diversified away by investing in both Madrigal Pharmaceuticals and Stoke Therapeutics 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 Stoke Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Madrigal Pharmaceuticals and Stoke Therapeutics, you can compare the effects of market volatilities on Madrigal Pharmaceuticals and Stoke Therapeutics 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 Stoke Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Madrigal Pharmaceuticals and Stoke Therapeutics.
Diversification Opportunities for Madrigal Pharmaceuticals and Stoke Therapeutics
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Madrigal and Stoke is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Madrigal Pharmaceuticals and Stoke Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoke Therapeutics 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 Stoke Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoke Therapeutics has no effect on the direction of Madrigal Pharmaceuticals i.e., Madrigal Pharmaceuticals and Stoke Therapeutics go up and down completely randomly.
Pair Corralation between Madrigal Pharmaceuticals and Stoke Therapeutics
Given the investment horizon of 90 days Madrigal Pharmaceuticals is expected to generate 1.99 times more return on investment than Stoke Therapeutics. However, Madrigal Pharmaceuticals is 1.99 times more volatile than Stoke Therapeutics. It trades about 0.36 of its potential returns per unit of risk. Stoke Therapeutics is currently generating about -0.03 per unit of risk. If you would invest 21,067 in Madrigal Pharmaceuticals on August 26, 2024 and sell it today you would earn a total of 13,678 from holding Madrigal Pharmaceuticals or generate 64.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Madrigal Pharmaceuticals vs. Stoke Therapeutics
Performance |
| Timeline |
| Madrigal Pharmaceuticals |
| Stoke Therapeutics |
Madrigal Pharmaceuticals and Stoke Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Madrigal Pharmaceuticals and Stoke Therapeutics
The main advantage of trading using opposite Madrigal Pharmaceuticals and Stoke Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Madrigal Pharmaceuticals position performs unexpectedly, Stoke Therapeutics 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 Stoke Therapeutics will offset losses from the drop in Stoke Therapeutics' long position.| Madrigal Pharmaceuticals vs. Eliem Therapeutics | Madrigal Pharmaceuticals vs. HCW Biologics | Madrigal Pharmaceuticals vs. Scpharmaceuticals | Madrigal Pharmaceuticals vs. Milestone Pharmaceuticals |
| Stoke Therapeutics vs. Eliem Therapeutics | Stoke Therapeutics vs. HCW Biologics | Stoke Therapeutics vs. Scpharmaceuticals | Stoke Therapeutics vs. Milestone Pharmaceuticals |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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