Correlation Between Dr Reddys and Galecto

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

Diversification Opportunities for Dr Reddys and Galecto

0.55

Correlation Coefficient

Dr Reddys  Galecto

Very weak diversification

The 3 months correlation between RDY and Galecto is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and Galecto in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Galecto 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 Galecto. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Galecto has no effect on the direction of Dr Reddys i.e., Dr Reddys and Galecto go up and down completely randomly.

Pair Corralation between Dr Reddys and Galecto

Considering the 90-day investment horizon Dr Reddys Laboratories is expected to under-perform the Galecto. But the stock apears to be less risky and, when comparing its historical volatility, Dr Reddys Laboratories is 5.94 times less risky than Galecto. The stock trades about -0.18 of its potential returns per unit of risk. The Galecto is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  515.00  in Galecto on December 27, 2024 and sell it today you would lose (121.00) from holding Galecto or give up 23.5% of portfolio value over 90 days.

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

Dr Reddys Laboratories  vs.  Galecto

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.

Galecto

Risk-Adjusted Performance

Very Weak

Over the last 90 days Galecto has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Galecto is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dr Reddys and Galecto

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

The idea behind Dr Reddys Laboratories and Galecto 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.