Correlation Between ANI Pharmaceuticals and Dr Reddys

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

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

Diversification Opportunities for ANI Pharmaceuticals and Dr Reddys

-0.66

Correlation Coefficient

ANI Pharmaceuticals  Dr Reddys

Excellent diversification

The 3 months correlation between ANI and RDY is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding ANI Pharmaceuticals and Dr Reddys Laboratories in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dr Reddys Laboratories and ANI 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 ANI Pharmaceuticals are associated (or correlated) with Dr Reddys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dr Reddys Laboratories has no effect on the direction of ANI Pharmaceuticals i.e., ANI Pharmaceuticals and Dr Reddys go up and down completely randomly.

Pair Corralation between ANI Pharmaceuticals and Dr Reddys

Given the investment horizon of 90 days ANI Pharmaceuticals is expected to generate 1.64 times more return on investment than Dr Reddys. However, ANI Pharmaceuticals is 1.64 times more volatile than Dr Reddys Laboratories. It trades about 0.14 of its potential returns per unit of risk. Dr Reddys Laboratories is currently generating about -0.18 per unit of risk. If you would invest  5,441  in ANI Pharmaceuticals on December 27, 2024 and sell it today you would earn a total of  1,192  from holding ANI Pharmaceuticals or generate 21.91% return on investment over 90 days.

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

ANI Pharmaceuticals  vs.  Dr Reddys Laboratories

ANI Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ANI Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, ANI Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Dr Reddys Laboratories

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dr Reddys Laboratories has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ANI Pharmaceuticals and Dr Reddys

The main advantage of trading using opposite ANI Pharmaceuticals and Dr Reddys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ANI Pharmaceuticals position performs unexpectedly, Dr Reddys 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 Dr Reddys will offset losses from the drop in Dr Reddys' long position.

The idea behind ANI Pharmaceuticals and Dr Reddys Laboratories 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.