Correlation Between Dr Reddys and Xencor

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

Diversification Opportunities for Dr Reddys and Xencor

-0.82

Correlation Coefficient

Dr Reddys  Xencor

Pay attention - limited upside

The 3 months correlation between RDY and Xencor is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Dr Reddys Laboratories and Xencor Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xencor Inc 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 Xencor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xencor Inc has no effect on the direction of Dr Reddys i.e., Dr Reddys and Xencor go up and down completely randomly.

Pair Corralation between Dr Reddys and Xencor

Considering the 90-day investment horizon Dr Reddys Laboratories is expected to under-perform the Xencor. But the stock apears to be less risky and, when comparing its historical volatility, Dr Reddys Laboratories is 2.89 times less risky than Xencor. The stock trades about -0.16 of its potential returns per unit of risk. The Xencor Inc is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,663  in Xencor Inc on September 4, 2024 and sell it today you would earn a total of  1,021  from holding Xencor Inc or generate 61.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Dr Reddys Laboratories  vs.  Xencor Inc

Dr Reddys Laboratories

Risk-Adjusted Performance

0 of 100

Very Weak

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 weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xencor Inc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Xencor Inc are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting fundamental indicators, Xencor reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dr Reddys and Xencor

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

The idea behind Dr Reddys Laboratories and Xencor Inc 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 Commodity Directory module to find actively traded commodities issued by global exchanges.