Correlation Between Natco Pharma and Mondelez International

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

Diversification Opportunities for Natco Pharma and Mondelez International

-0.44

Correlation Coefficient

Natco Pharma  Mondelez International

Very good diversification

The 3 months correlation between Natco and Mondelez is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Natco Pharma Limited and Mondelez International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mondelez International 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 Mondelez International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mondelez International has no effect on the direction of Natco Pharma i.e., Natco Pharma and Mondelez International go up and down completely randomly.

Pair Corralation between Natco Pharma and Mondelez International

Assuming the 90 days trading horizon Natco Pharma Limited is expected to generate 1.46 times more return on investment than Mondelez International. However, Natco Pharma is 1.46 times more volatile than Mondelez International. It trades about 0.13 of its potential returns per unit of risk. Mondelez International is currently generating about 0.12 per unit of risk. If you would invest  99,730  in Natco Pharma Limited on February 5, 2024 and sell it today you would earn a total of  3,680  from holding Natco Pharma Limited or generate 3.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.36%
Values	Daily Returns

Natco Pharma Limited  vs.  Mondelez International

Natco Pharma Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Natco Pharma Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Natco Pharma demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Mondelez International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mondelez International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Natco Pharma and Mondelez International

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

The idea behind Natco Pharma Limited and Mondelez International 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 CEOs Directory module to screen CEOs from public companies around the world.