Correlation Between Dr Reddys and Perrigo

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

Diversification Opportunities for Dr Reddys and Perrigo

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Dr Reddys and Perrigo is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and Perrigo Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Perrigo Company 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 Perrigo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Perrigo Company has no effect on the direction of Dr Reddys i.e., Dr Reddys and Perrigo go up and down completely randomly.

Pair Corralation between Dr Reddys and Perrigo

Considering the 90-day investment horizon Dr Reddys Laboratories is expected to generate 0.86 times more return on investment than Perrigo. However, Dr Reddys Laboratories is 1.16 times less risky than Perrigo. It trades about 0.02 of its potential returns per unit of risk. Perrigo Company is currently generating about -0.02 per unit of risk. If you would invest  5,116  in Dr Reddys Laboratories on April 4, 2022 and sell it today you would earn a total of  468.00  from holding Dr Reddys Laboratories or generate 9.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Dr Reddys Laboratories  vs.  Perrigo Company

 Performance (%) 
      Timeline 
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

Perrigo Company 
Perrigo Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Perrigo Company are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, Perrigo may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0256
Payout Ratio
0.53
Last Split Factor
2:1
Forward Annual Dividend Rate
1.04
Dividend Date
2022-06-21
Ex Dividend Date
2022-06-02
Last Split Date
1993-08-26

Perrigo Price Channel

Dr Reddys and Perrigo Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Dr Reddys and Perrigo

The main advantage of trading using opposite Dr Reddys and Perrigo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dr Reddys position performs unexpectedly, Perrigo 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 Perrigo will offset losses from the drop in Perrigo's long position.
The idea behind Dr Reddys Laboratories and Perrigo Company 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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