Correlation Between MGT Capital and Dr Reddys
Can any of the company-specific risk be diversified away by investing in both MGT Capital 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 MGT Capital and Dr Reddys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MGT Capital Investments and Dr Reddys Laboratories, you can compare the effects of market volatilities on MGT Capital 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 MGT Capital with a short position of Dr Reddys. Check out your portfolio center. Please also check ongoing floating volatility patterns of MGT Capital and Dr Reddys.
Diversification Opportunities for MGT Capital and Dr Reddys
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between MGT and RDY is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding MGT Capital Investments 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 MGT Capital 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 MGT Capital Investments 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 MGT Capital i.e., MGT Capital and Dr Reddys go up and down completely randomly.
Pair Corralation between MGT Capital and Dr Reddys
Given the investment horizon of 90 days MGT Capital Investments is expected to generate 26.51 times more return on investment than Dr Reddys. However, MGT Capital is 26.51 times more volatile than Dr Reddys Laboratories. It trades about 0.04 of its potential returns per unit of risk. Dr Reddys Laboratories is currently generating about 0.07 per unit of risk. If you would invest 0.50 in MGT Capital Investments on January 24, 2024 and sell it today you would lose (0.45) from holding MGT Capital Investments or give up 90.0% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 46.12% |
Values | Daily Returns |
MGT Capital Investments vs. Dr Reddys Laboratories
Performance |
Timeline |
MGT Capital Investments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Dr Reddys Laboratories |
MGT Capital and Dr Reddys Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MGT Capital and Dr Reddys
The main advantage of trading using opposite MGT Capital and Dr Reddys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MGT Capital 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 MGT Capital Investments 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.Dr Reddys vs. Silver Spike Investment | Dr Reddys vs. Alkermes Plc | Dr Reddys vs. Eagle Pharmaceuticals | Dr Reddys vs. Evotec SE ADR |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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