Correlation Between Sarepta Therapeutics and Madrigal Pharmaceuticals
Can any of the company-specific risk be diversified away by investing in both Sarepta Therapeutics and Madrigal 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 Sarepta Therapeutics and Madrigal Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sarepta Therapeutics and Madrigal Pharmaceuticals, you can compare the effects of market volatilities on Sarepta Therapeutics and Madrigal 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 Sarepta Therapeutics with a short position of Madrigal Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sarepta Therapeutics and Madrigal Pharmaceuticals.
Diversification Opportunities for Sarepta Therapeutics and Madrigal Pharmaceuticals
-0.42 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Sarepta and Madrigal is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sarepta Therapeutics and Madrigal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madrigal Pharmaceuticals and Sarepta Therapeutics 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 Sarepta Therapeutics are associated (or correlated) with Madrigal Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madrigal Pharmaceuticals has no effect on the direction of Sarepta Therapeutics i.e., Sarepta Therapeutics and Madrigal Pharmaceuticals go up and down completely randomly.
Pair Corralation between Sarepta Therapeutics and Madrigal Pharmaceuticals
Given the investment horizon of 90 days Sarepta Therapeutics is expected to under-perform the Madrigal Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Sarepta Therapeutics is 2.88 times less risky than Madrigal Pharmaceuticals. The stock trades about -0.23 of its potential returns per unit of risk. The Madrigal Pharmaceuticals is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 21,700 in Madrigal Pharmaceuticals on August 28, 2024 and sell it today you would earn a total of 12,818 from holding Madrigal Pharmaceuticals or generate 59.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sarepta Therapeutics vs. Madrigal Pharmaceuticals
Performance |
| Timeline |
| Sarepta Therapeutics |
| Madrigal Pharmaceuticals |
Sarepta Therapeutics and Madrigal Pharmaceuticals Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sarepta Therapeutics and Madrigal Pharmaceuticals
The main advantage of trading using opposite Sarepta Therapeutics and Madrigal Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sarepta Therapeutics position performs unexpectedly, Madrigal 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 Madrigal Pharmaceuticals will offset losses from the drop in Madrigal Pharmaceuticals' long position.| Sarepta Therapeutics vs. Krystal Biotech | Sarepta Therapeutics vs. PTC Therapeutics | Sarepta Therapeutics vs. Iovance Biotherapeutics | Sarepta Therapeutics vs. Madrigal Pharmaceuticals |
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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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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