Correlation Between Dr Reddys and SciClone Pharmaceuticals

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

Diversification Opportunities for Dr Reddys and SciClone Pharmaceuticals

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Correlation Coefficient

Dr Reddys  SciClone Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between RDY and SciClone is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and SciClone Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SciClone Pharmaceuticals 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 SciClone Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SciClone Pharmaceuticals has no effect on the direction of Dr Reddys i.e., Dr Reddys and SciClone Pharmaceuticals go up and down completely randomly.

Pair Corralation between Dr Reddys and SciClone Pharmaceuticals

If you would invest  5,375  in Dr Reddys Laboratories on January 20, 2024 and sell it today you would earn a total of  1,716  from holding Dr Reddys Laboratories or generate 31.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.21%
Values	Daily Returns

Dr Reddys Laboratories  vs.  SciClone Pharmaceuticals

Dr Reddys Laboratories

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dr Reddys Laboratories are ranked lower than 5 (%) 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 newest stock price disturbance, may contribute to short-term losses for the investors.

SciClone Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Dr Reddys and SciClone Pharmaceuticals

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

The idea behind Dr Reddys Laboratories and SciClone Pharmaceuticals 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.