Correlation Between Dr Reddys and MetLife
Can any of the company-specific risk be diversified away by investing in both Dr Reddys and MetLife 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 MetLife 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 MetLife, you can compare the effects of market volatilities on Dr Reddys and MetLife 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 MetLife. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dr Reddys and MetLife.
Diversification Opportunities for Dr Reddys and MetLife
Significant diversification
The 3 months correlation between RDY and MetLife is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and MetLife in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetLife 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 MetLife. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetLife has no effect on the direction of Dr Reddys i.e., Dr Reddys and MetLife go up and down completely randomly.
Pair Corralation between Dr Reddys and MetLife
Considering the 90-day investment horizon Dr Reddys Laboratories is expected to generate 0.84 times more return on investment than MetLife. However, Dr Reddys Laboratories is 1.2 times less risky than MetLife. It trades about 0.06 of its potential returns per unit of risk. MetLife is currently generating about 0.03 per unit of risk. If you would invest 4,954 in Dr Reddys Laboratories on January 25, 2024 and sell it today you would earn a total of 2,195 from holding Dr Reddys Laboratories or generate 44.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Dr Reddys Laboratories vs. MetLife
Performance |
| Timeline |
| Dr Reddys Laboratories |
| MetLife |
Dr Reddys and MetLife Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Dr Reddys and MetLife
The main advantage of trading using opposite Dr Reddys and MetLife positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dr Reddys position performs unexpectedly, MetLife 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 MetLife will offset losses from the drop in MetLife's long position.The idea behind Dr Reddys Laboratories and MetLife 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.| MetLife vs. Lincoln National | MetLife vs. Aflac Incorporated | MetLife vs. Unum Group | MetLife vs. Manulife Financial Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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