Don't consider investing in AUROPHARMA now, it is risky at the moment

AUROBINDO PHARMA LTD delivered lacklustre performance today. It returned -0.64% to close at 770.05. It's recent 5 day performance has been -1.69%, +0.22%, +2.12%, +0.05% and -0.91%.

[Themes containing AUROPHARMA]

AUROPHARMA showed a up trend over the last 3 months. During this period AUROPHARMA returned +2.97% and saw a maximum drawdown of -13.56%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in AUROPHARMA till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

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Volatility

Return distribution

AUROPHARMA has been outperforming the NIFTY-50 index in recent time. Over the last 3 years and 1 month, AUROPHARMA underperformed the NIFTY-50 index on 53% days.

During the last three months AUROPHARMA delivered losses on 51% days. However, it still managed to end this period in a profit. It's best return during this period (of +7.41%) was on Monday, 29 Oct, 2018. While it's worst loss in the same period (of -5.53%) was on Thursday, 6 Dec, 2018. There was initially a bullish trend during this period which started on 6 Nov, 2018 and went on till 9 Nov, 2018. The bullish trend returned +4.59% to investors. This was followed by a bearish trend that started on 18 Dec, 2018 and ended on 24 Dec, 2018. This bearish trend lost -4.11% of investor capital.

On monthly basis, AUROPHARMA delivered profits in more months over the last year, than losses. AUROPHARMA delivered profits in more months than NIFTY-50 index. AUROPHARMA significantly outperformed NIFTY-50 index in Aug 2018, when it returned +20.53% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. AUROPHARMA had a longer winning streak of profitable months than NIFTY-50 index. It went up in 4 straight months (from Aug 2018 to Nov 2018) during which period it delivered +30.42%. It is interesting to note that both AUROPHARMA and NIFTY-50 index significantly outperform during months when quarterly/annual results are announced.

The individual investor should act consistently as an investor and not as a speculator.
-- Ben Graham

AUROPHARMA is becoming less volatile overall. In comparison, the NIFTY-50 index is seeing a fall in volatility. During the last three months, there was a significant fall in AUROPHARMA's volatility from 29 Oct, 2018 to 3 Jan, 2019. While there was a significant fall in the NIFTY-50 index's volatility from 31 Oct, 2018 to 5 Dec, 2018.

Advanced/professional short-term investors should note that AUROPHARMA has negative skewness in it's return distribution. This indicates that investors may need to stay invested through long periods of drawdown before expecting a recovery.

Investors trading in AUROPHARMA derivatives at this moment can consider 'Long Strangle' options strategy to receive better risk-adjusted returns.

AUROPHARMA has more chance of extreme outcomes than the NIFTY-50 index. Therefore, AUROPHARMA must receive a lower allocation than NIFTY-50 in your portfolio. NIFTY-50 index usually has shorter drawdown period than AUROPHARMA.

On a general note (since you are interested in AUROPHARMA), two instruments that deserve special mention are LTTS and CUB. They have significantly outperformed the overall market this year.