Correlation Between CanSino Biologics and Dr Reddys

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

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

Diversification Opportunities for CanSino Biologics and Dr Reddys

-0.16

Correlation Coefficient

CanSino Biologics  Dr Reddys

Good diversification

The 3 months correlation between CanSino and RDY is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding CanSino Biologics 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 CanSino Biologics 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 CanSino Biologics 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 CanSino Biologics i.e., CanSino Biologics and Dr Reddys go up and down completely randomly.

Pair Corralation between CanSino Biologics and Dr Reddys

Assuming the 90 days horizon CanSino Biologics is expected to generate 4.07 times more return on investment than Dr Reddys. However, CanSino Biologics is 4.07 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 -0.13 per unit of risk. If you would invest  206.00  in CanSino Biologics on January 25, 2024 and sell it today you would earn a total of  4.00  from holding CanSino Biologics or generate 1.94% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

CanSino Biologics  vs.  Dr Reddys Laboratories

CanSino Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CanSino Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, CanSino Biologics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Dr Reddys Laboratories

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Reddys Laboratories are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental indicators, Dr Reddys is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CanSino Biologics and Dr Reddys

The main advantage of trading using opposite CanSino Biologics and Dr Reddys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CanSino Biologics 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 CanSino Biologics 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.

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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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.