Correlation Between American Express and Dr Reddys

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both American Express 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 American Express and Dr Reddys into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Express and Dr Reddys Laboratories, you can compare the effects of market volatilities on American Express 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 American Express with a short position of Dr Reddys. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Express and Dr Reddys.

Diversification Opportunities for American Express and Dr Reddys

0.24
  Correlation Coefficient

Modest diversification

The 3 months correlation between American and Dr Reddys is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding American Express 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 American Express 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 American Express 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 American Express i.e., American Express and Dr Reddys go up and down completely randomly.

Pair Corralation between American Express and Dr Reddys

Considering the 90-day investment horizon American Express is expected to generate 1.44 times more return on investment than Dr Reddys. However, American Express is 1.44 times more volatile than Dr Reddys Laboratories. It trades about -0.01 of its potential returns per unit of risk. Dr Reddys Laboratories is currently generating about -0.04 per unit of risk. If you would invest  15,788  in American Express on April 5, 2022 and sell it today you would lose (1,748)  from holding American Express or give up 11.07% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

American Express  vs.  Dr Reddys Laboratories

 Performance (%) 
      Timeline 
American Express 
American Performance
0 of 100
Over the last 90 days American Express 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 basic indicators remain very healthy which may send shares a bit higher in August 2022. The recent disarray may also be a sign of long period up-swing for the firm insiders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0148
Payout Ratio
0.19
Last Split Factor
10000:8753
Forward Annual Dividend Rate
2.08
Dividend Date
2022-08-10
Ex Dividend Date
2022-06-30
Last Split Date
2005-10-03

American Price Channel

Dr Reddys Laboratories 
Dr Reddys Performance
0 of 100
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 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.

Structure and Payout Changes

Forward Annual Dividend Yield
0.006
Payout Ratio
0.38
Last Split Factor
2:1
Forward Annual Dividend Rate
0.34
Dividend Date
2021-08-11
Ex Dividend Date
2021-07-08
Last Split Date
2006-09-07

Dr Reddys Price Channel

American Express and Dr Reddys Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with American Express and Dr Reddys

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

American Express

Pair trading matchups for American Express

The idea behind American Express 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.
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 Transaction History module to view history of all your transactions and understand their impact on performance.

Other Complementary Tools

Focused Opportunities
Build portfolios using our predefined set of ideas and optimize them against your investing preferences
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Fund Screener
Find actively-traded funds from around the world traded on over 30 global exchanges
Go
Global Correlations
Find global opportunities by holding instruments from different markets
Go
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Options Analysis
Analyze and evaluate options and option chains as a potential hedge for your portfolios
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go