Correlation Between Masimo and Madrigal Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Masimo 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 Masimo and Madrigal Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Masimo and Madrigal Pharmaceuticals, you can compare the effects of market volatilities on Masimo 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 Masimo with a short position of Madrigal Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Masimo and Madrigal Pharmaceuticals.

Diversification Opportunities for Masimo and Madrigal Pharmaceuticals

-0.23

Correlation Coefficient

Masimo  Madrigal Pharmaceuticals

Very good diversification

The 3 months correlation between Masimo and Madrigal is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Masimo and Madrigal Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Madrigal Pharmaceuticals and Masimo 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 Masimo 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 Masimo i.e., Masimo and Madrigal Pharmaceuticals go up and down completely randomly.

Pair Corralation between Masimo and Madrigal Pharmaceuticals

Given the investment horizon of 90 days Masimo is expected to under-perform the Madrigal Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Masimo is 1.49 times less risky than Madrigal Pharmaceuticals. The stock trades about -0.03 of its potential returns per unit of risk. The Madrigal Pharmaceuticals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  43,222  in Madrigal Pharmaceuticals on September 12, 2025 and sell it today you would earn a total of  13,911  from holding Madrigal Pharmaceuticals or generate 32.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Masimo  vs.  Madrigal Pharmaceuticals

Masimo

Risk-Adjusted Performance

Weakest

Over the last 90 days Masimo has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Masimo is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Madrigal Pharmaceuticals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Madrigal Pharmaceuticals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Madrigal Pharmaceuticals disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Masimo and Madrigal Pharmaceuticals

The main advantage of trading using opposite Masimo and Madrigal Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Masimo 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.

The idea behind Masimo and Madrigal Pharmaceuticals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.