Correlation Between Natco Pharma and Anheuser Busch

Can any of the company-specific risk be diversified away by investing in both Natco Pharma and Anheuser Busch 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 Natco Pharma and Anheuser Busch into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Natco Pharma Limited and Anheuser Busch Inbev, you can compare the effects of market volatilities on Natco Pharma and Anheuser Busch 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 Natco Pharma with a short position of Anheuser Busch. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natco Pharma and Anheuser Busch.

Diversification Opportunities for Natco Pharma and Anheuser Busch

0.03

Correlation Coefficient

Natco Pharma  Anheuser Busch

Significant diversification

The 3 months correlation between Natco and Anheuser is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Natco Pharma Limited and Anheuser Busch Inbev in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anheuser Busch Inbev and Natco Pharma 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 Natco Pharma Limited are associated (or correlated) with Anheuser Busch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anheuser Busch Inbev has no effect on the direction of Natco Pharma i.e., Natco Pharma and Anheuser Busch go up and down completely randomly.

Pair Corralation between Natco Pharma and Anheuser Busch

Assuming the 90 days trading horizon Natco Pharma is expected to generate 15.0 times less return on investment than Anheuser Busch. In addition to that, Natco Pharma is 1.31 times more volatile than Anheuser Busch Inbev. It trades about 0.0 of its total potential returns per unit of risk. Anheuser Busch Inbev is currently generating about 0.06 per unit of volatility. If you would invest  6,218  in Anheuser Busch Inbev on February 26, 2024 and sell it today you would earn a total of  286.00  from holding Anheuser Busch Inbev or generate 4.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.77%
Values	Daily Returns

Natco Pharma Limited  vs.  Anheuser Busch Inbev

Natco Pharma Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Natco Pharma Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Natco Pharma is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Anheuser Busch Inbev

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anheuser Busch Inbev are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Anheuser Busch is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Natco Pharma and Anheuser Busch

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

The idea behind Natco Pharma Limited and Anheuser Busch Inbev 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.