Correlation Between Dr Reddys and Identiv

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

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

Diversification Opportunities for Dr Reddys and Identiv

0.6

Correlation Coefficient

Dr Reddys  Identiv

Poor diversification

The 3 months correlation between RDDA and Identiv is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and Identiv in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Identiv and Dr Reddys 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 Dr Reddys Laboratories are associated (or correlated) with Identiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Identiv has no effect on the direction of Dr Reddys i.e., Dr Reddys and Identiv go up and down completely randomly.

Pair Corralation between Dr Reddys and Identiv

Assuming the 90 days trading horizon Dr Reddys Laboratories is expected to under-perform the Identiv. But the stock apears to be less risky and, when comparing its historical volatility, Dr Reddys Laboratories is 2.04 times less risky than Identiv. The stock trades about -0.13 of its potential returns per unit of risk. The Identiv is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  350.00  in Identiv on December 22, 2024 and sell it today you would lose (37.00) from holding Identiv or give up 10.57% of portfolio value over 90 days.

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

Dr Reddys Laboratories  vs.  Identiv

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. Despite fragile performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Identiv

Risk-Adjusted Performance

Very Weak

Over the last 90 days Identiv has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Dr Reddys and Identiv

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

The idea behind Dr Reddys Laboratories and Identiv 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.