Correlation Between Dr Reddys and Agios Pharm

Can any of the company-specific risk be diversified away by investing in both Dr Reddys and Agios Pharm 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 Agios Pharm 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 Agios Pharm, you can compare the effects of market volatilities on Dr Reddys and Agios Pharm 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 Agios Pharm. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Reddys and Agios Pharm.

Diversification Opportunities for Dr Reddys and Agios Pharm

0.27

Correlation Coefficient

Dr Reddys  Agios Pharm

Modest diversification

The 3 months correlation between RDY and Agios is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and Agios Pharm in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Agios Pharm 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 Agios Pharm. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Agios Pharm has no effect on the direction of Dr Reddys i.e., Dr Reddys and Agios Pharm go up and down completely randomly.

Pair Corralation between Dr Reddys and Agios Pharm

Considering the 90-day investment horizon Dr Reddys Laboratories is expected to under-perform the Agios Pharm. But the stock apears to be less risky and, when comparing its historical volatility, Dr Reddys Laboratories is 1.67 times less risky than Agios Pharm. The stock trades about -0.18 of its potential returns per unit of risk. The Agios Pharm is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  3,340  in Agios Pharm on December 27, 2024 and sell it today you would lose (300.00) from holding Agios Pharm or give up 8.98% of portfolio value over 90 days.

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

Dr Reddys Laboratories  vs.  Agios Pharm

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.

Agios Pharm

Risk-Adjusted Performance

Very Weak

Over the last 90 days Agios Pharm has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dr Reddys and Agios Pharm

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

The idea behind Dr Reddys Laboratories and Agios Pharm 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.