Correlation Between Dr Reddys and Origin Agritech

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

Diversification Opportunities for Dr Reddys and Origin Agritech

0.23
  Correlation Coefficient

Modest diversification

The 3 months correlation between Dr Reddys and Origin is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and Origin Agritech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Origin Agritech 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 Origin Agritech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Origin Agritech has no effect on the direction of Dr Reddys i.e., Dr Reddys and Origin Agritech go up and down completely randomly.

Pair Corralation between Dr Reddys and Origin Agritech

Considering the 90-day investment horizon Dr Reddys Laboratories is expected to under-perform the Origin Agritech. But the stock apears to be less risky and, when comparing its historical volatility, Dr Reddys Laboratories is 4.33 times less risky than Origin Agritech. The stock trades about -0.05 of its potential returns per unit of risk. The Origin Agritech is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,051  in Origin Agritech on April 6, 2022 and sell it today you would lose (237.00)  from holding Origin Agritech or give up 22.55% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dr Reddys Laboratories  vs.  Origin Agritech

 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

Origin Agritech 
Origin Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Origin Agritech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Origin Agritech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Structure and Payout Changes

Last Split Factor
1:10
Dividend Date
2018-07-10
Last Split Date
2018-07-10

Origin Price Channel

Dr Reddys and Origin Agritech Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Dr Reddys and Origin Agritech

The main advantage of trading using opposite Dr Reddys and Origin Agritech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dr Reddys position performs unexpectedly, Origin Agritech 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 Origin Agritech will offset losses from the drop in Origin Agritech's long position.
The idea behind Dr Reddys Laboratories and Origin Agritech 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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