Schrödinger’s Downside Magnet in a Bull‑High Vol Market

Six risk flags and a history of deep drawdowns raise questions about upside potential

SDGR Schrödinger, Inc.

In this report

01

Returns Overview

Period returns, alpha, cumulative performance, distributions

P. 2-3

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02

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

P. 4-5

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03

Beta & Correlation

Trailing, upside, downside beta, systematic risk

P. 6-7

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04

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

P. 8-9

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05

Market Regime Analysis

Bull/bear behavior, capture ratios

P. 10-11

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06

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

P. 12-13

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Returns Overview

Schrödinger, Inc. (SDGR) — Return Performance

Schrödinger, Inc. (SDGR) displayed a highly volatile return profile over the past five years, with cumulative losses across all horizons. The stock posted a modest 1‑month gain of -5.39% relative to its sector ETF benchmark, but generated a strong 3‑month outperformance of +13.49% alpha (26.58% total return vs sector's 22.22%). However, the upside quickly reversed, as evidenced by deep declines over longer periods: -19.57% total return and -27.44% alpha for 6 months, -28.53% total and -47.53% alpha for 1 year, and cumulative underperformance of -71.19% (alpha -137.11%) over three years, widening to -80.98% (alpha -152.8%) over five years.

Period Returns vs S&P 500 & XLV

Monthly Returns Heatmap

SDGR

The company generated positive alpha only in the short‑term 3‑month window (+13.49%), indicating a brief period of outperformance before a sustained downtrend. Over medium to long horizons (6 months to 5 years), SDGR consistently underperformed its sector, with alphas ranging from -27.44% to -152.8%, highlighting a pronounced divergence between short‑term momentum and long‑term weakness.

Returns Overview

Schrödinger, Inc. (SDGR) — Return Charts

Volatility Analysis

Schrödinger, Inc. (SDGR) — Volatility Profile

Schrödinger, Inc. (SDGR) exhibits markedly higher price variability than the broad market, with an annualized volatility of 69.96% compared to the S&P 500's 17.78%, indicating that its share price moves roughly four times as much on a yearly basis. The downside risk profile is pronounced: a downside deviation of 42.79% and a historic max drawdown of -90.21% over a five‑year window underscore severe loss potential, especially given the drawdown lasted from March 2021 to March 2026 with no recovery to prior peaks. While short‑term (60‑day) volatility at 54.23% remains above the longer‑term 252‑day level of 53.64%, both metrics are still far below the company’s long‑run average, suggesting that recent price swings have been slightly muted relative to its historically volatile regime.

Volatility Metrics

SDGR

The company's annualized volatility of nearly 70% dwarfs the S&P 500 benchmark, reflecting a high‑beta equity that reacts strongly to both company‑specific news and broader market sentiment. Downside risk is acute: the downside deviation of 42.79% signals that losses are more severe than gains on average, while the -90.21% max drawdown illustrates an extreme tail event with a multi‑year recovery horizon that has not yet materialized. Current trailing volatilities—54.23% over 60 days and 53.64% over 252 days—are modestly lower than the long‑term average, indicating a slight easing of price turbulence but still well above market norms.

SDGR's annualized volatility is roughly four times higher than the S&P 500.
Downside deviation of 42.79% points to asymmetric risk with larger loss swings.
The -90.21% max drawdown over five years highlights a severe, prolonged downside episode.
Short‑term (60‑day) volatility remains above the longer‑term (252‑day) level, though both are slightly below the historical average.
No price recovery has occurred since the 2021 peak, extending the drawdown duration beyond five years.

Positive Characteristics
Trailing volatilities have marginally eased relative to the company's historic average, suggesting a modest reduction in short‑term turbulence.
The persistence of high volatility may create opportunities for investors seeking larger price moves and potential upside rebounds if fundamentals improve.

Volatility Analysis

Schrödinger, Inc. (SDGR) — Volatility & Drawdown Charts

Beta & Correlation

Schrödinger, Inc. (SDGR) — Beta Profile

Schrödinger, Inc. (SDGR) exhibits a trailing beta of 1.156 versus the S&P 500, placing it in the "market‑like" range (0.8–1.2). This suggests that over the past twelve months the stock has moved roughly in step with broad market fluctuations, offering neither a defensive cushion nor an aggressively leveraged exposure. However, its sector beta of 1.043 versus the Healthcare index (XLV) indicates slightly higher sensitivity to sector‑specific drivers than to the overall market, meaning that health‑care trends will explain a modest portion of price movements.

Beta & Correlation Metrics

SDGR

The asymmetric beta profile—upside beta 0.684 versus downside beta 0.986—reveals that SDGR tends to rise less sharply on market gains while falling more steeply on market declines, a pattern that heightens downside risk for investors during bear markets. A correlation of 0.341 with the S&P 500 and an R‑squared of only 11.6% indicate that just over one‑tenth of the stock’s variance is explained by overall market movements; the remaining 88.4% is idiosyncratic, reflecting company‑specific drivers such as drug pipeline outcomes or partnership announcements.

Trailing beta of 1.156 signals market‑like volatility but not extreme leverage.
Downside beta (0.986) exceeds upside beta (0.684), implying greater sensitivity to market drops.
R‑squared of 11.6% shows low systematic influence; most price action is driven by firm‑specific factors.
Systematic risk accounts for only 11.6% of total variance, while idiosyncratic risk dominates at 88.4%.
Sector beta (1.043) is slightly lower than market beta, indicating that health‑care dynamics contribute less to overall risk than broader market forces.

Positive Characteristics
Market‑like beta provides exposure to upside potential when the equity market rallies.
Low R‑squared suggests diversification benefits; SDGR’s returns are largely independent of market swings.

Beta & Correlation

Schrödinger, Inc. (SDGR) — Rolling Beta

Positive Notes

Market‑like beta provides exposure to upside potential when the equity market rallies.

Low R‑squared suggests diversification benefits; SDGR’s returns are largely independent of market swings.

Risk-Adjusted Returns

Schrödinger, Inc. (SDGR) — Risk-Adjusted Performance

Schrödinger, Inc. (SDGR) delivers modest risk-adjusted returns over the recent period, reflected in a Sharpe ratio of 0.138 which falls well below the benchmark threshold of 1.0 and indicates that total return barely exceeds the risk‑free rate on a per‑unit‑risk basis. The Sortino ratio of 0.226 surpasses the Sharpe figure, suggesting that the stock’s downside volatility is lower than its overall volatility and that the limited upside has been achieved with relatively restrained negative swings. However, the Calmar ratio of 0.147 signals a weak return‑to‑drawdown profile, as the company’s historical maximum drawdown erodes most of the generated excess returns, while an Information Ratio of –0.021 points to negligible or slightly negative alpha relative to its benchmark.

Risk-free rate: 3.63% (Fed Funds Rate)

Risk-Adjusted Metrics

SDGR

The Sharpe ratio of 0.138 places SDGR at the lower end of risk‑adjusted performance, implying that investors are compensated only marginally for total volatility taken. The higher Sortino ratio (0.226) indicates that downside risk is less pronounced than overall risk, which may appeal to more risk‑averse investors seeking limited loss potential. Nonetheless, the Calmar ratio of 0.147 reveals that severe drawdowns have consumed a large portion of any excess return, and the negative Information Ratio (-0.021) suggests that active management has not added consistent value beyond passive market exposure.

Sharpe ratio (0.138) is well below 1.0, indicating weak total risk‑adjusted performance.
Sortino ratio exceeds Sharpe, highlighting a comparatively favorable downside volatility profile.
Calmar ratio (0.147) points to severe historical drawdowns relative to returns earned.
Information Ratio is negative (-0.021), suggesting no consistent alpha generation.

Positive Characteristics
Downside risk is relatively contained as evidenced by the higher Sortino ratio versus Sharpe.
Treynor ratio of 8.36 indicates a strong return per unit of systematic (beta) risk, implying that market exposure has been rewarded.

Risk-Adjusted Returns

Schrödinger, Inc. (SDGR) — Rolling Sharpe & Sortino

Positive Notes

Downside risk is relatively contained as evidenced by the higher Sortino ratio versus Sharpe.

Treynor ratio of 8.36 indicates a strong return per unit of systematic (beta) risk, implying that market exposure has been rewarded.

Market Regime Analysis

Schrödinger, Inc. (SDGR) — Regime Behavior

Schrödinger, Inc. (SDGR) demonstrates a pronounced sensitivity to market volatility regimes, delivering modest gains in bullish, high‑volatility environments while suffering steep losses when the broader market is bearish and calm. The stock’s average return of +3.87% during Bull‑HighVol periods contrasts sharply with a -23.37% decline in Bear‑LowVol months, indicating that heightened market turbulence can temporarily buoy its performance but does not protect it from downside risk in orderly declines. Its upside capture of 110.3% suggests the company participates slightly better than the S&P 500 on the upside, yet a downside capture of 204.9% and a capture ratio of 0.54 reveal that losses are more than twice as severe relative to market downturns.

Current Market Regime: Bull-HighVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

SDGR

In Bull‑LowVol conditions SDGR underperforms, posting an average -2.02% return over 29 months, implying the stock struggles when equity markets rise smoothly and investors favor lower‑risk assets. Conversely, during Bull‑HighVol periods it generates a healthy +3.87% average gain across 28 months, reflecting its relative resilience to heightened market swings. The stark -23.37% loss in Bear‑LowVol months (albeit over just one month of data) signals vulnerability when the market declines calmly, while the modest -0.89% decline during Bear‑HighVol suggests some defensive characteristic amid chaotic downturns, though the downside capture remains high.

Market Regime Analysis

Schrödinger, Inc. (SDGR) — Regime & Capture Charts

Regime Timeline

SDGR’s upside capture exceeds 100% (110.3%), indicating it can outpace the S&P 500 in rising markets when volatility is elevated.
Downside capture of 204.9% means the stock loses more than twice the market’s decline, highlighting asymmetric risk exposure.
The capture ratio of 0.54 is well below the ideal >1.0 threshold, confirming that downside losses dominate upside gains.
Performance in Bull‑LowVol regimes is negative (-2.02%), suggesting the stock does not benefit from calm uptrends.
Current Bull‑HighVol regime aligns with SDGR’s strongest historical average (+3.87%), offering a relatively favorable short‑term outlook.

Positive Characteristics
Strong upside participation during volatile bull markets (110.3% capture).
Relatively modest loss (-0.89%) in Bear‑HighVol periods indicates some defensive resilience amid market turmoil.

Investment Highlights & Risk Summary

Schrödinger, Inc. (SDGR) — Summary & Implications

Schrödinger, Inc. (SDGR) has delivered a challenging performance over the past year, posting a total return of -28.53% and an alpha of -47.53% versus the S&P 500, indicating substantial underperformance relative to both broad market and its healthcare sector peers. The stock’s risk profile is marked by extreme volatility (annualized 69.96%) and a historic max drawdown of -90.21%, reflecting a high probability of large capital losses in adverse market regimes. Despite these headwinds, the company exhibits an upside capture of 110.3% during bullish periods, suggesting that it can participate fully in market rallies when they occur. However, the downside capture of 204.9% and asymmetric downside beta (0.99 down vs 0.68 up) mean that losses are amplified in downturns, resulting in a modest Sharpe ratio of 0.138 and Sortino ratio of 0.226, both well below typical investment-grade thresholds.

Summary Dashboard

Investment Highlights

Upside capture of 110.3% indicates the stock fully participates in market gains during bullish cycles.
Beta of 1.156 shows exposure slightly higher than the market, which can be attractive for investors seeking amplified upside when markets rise.
Sector beta of 1.043 suggests the company moves closely with healthcare trends, providing sector‑aligned exposure.
Despite recent weakness, the firm’s proprietary computational chemistry platform offers long‑term secular growth potential that could drive future earnings acceleration.

Risk-Return Rankings

SDGR HIGH

High volatility and deep drawdown dominate a modest upside capture, resulting in an elevated risk-return profile.

Strength: Upside capture of 110.3% during market rallies.

Concern: Maximum historical drawdown of -90.21% and downside capture of 204.9%.

Key Takeaways

The stock’s extreme volatility (69.96%) and deep historic drawdown make it unsuitable for risk‑averse investors.
Upside participation is strong, but the asymmetric downside exposure erodes risk-adjusted returns, as reflected by a Sharpe of 0.138.
Sector underperformance of -43.06% versus XLV highlights that the company lags its healthcare peers significantly.
Investors should monitor any catalyst that could shift the capture profile, such as product milestones or partnership announcements.

PORTFOLIO IMPLICATIONS

Given its high volatility and pronounced downside bias, SDGR is best positioned as a satellite holding within a diversified portfolio rather than a core allocation. It may complement lower‑beta, defensive assets by providing upside participation during market rallies, but investors should size the position conservatively to mitigate the risk of large drawdowns. Active monitoring of volatility regimes and company‑specific catalysts is essential to adjust exposure appropriately.

SDGR

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Report written 2026-06-07 • Finexus

Disclaimer

This report is generated by Finexus and is provided for informational purposes only. It does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any security.

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