2596.8 -22.16 (-0.85%) Sell

Stop-loss on the minds of DRREDDY investors as it underperforms

13 min read

DR. REDDY'S LABORATORIES underperformed broader market on Friday. It fell by -0.85% to close at 2596.8. It is currently trading +38% above it's 52 week low of 1873.05 and is down only -4% from it's 52 week high.

[Themes containing DRREDDY]

Buy-and-Hold investors in DRREDDY experienced a maximum drawdown of -7.49% over the last three months. It delivered +1.74% during this bullish trending period. There were both Long and Short signals during this period, while the long signals were significantly more profitable than the short signals.


DRREDDY has been underperforming the NIFTY-50 index in recent time. It showed significant underperformance (compared to the NIFTY-50 index) from 20 Jul, 2016 to 30 Jul, 2018. Over the last 3 years and 1 month, DRREDDY underperformed the NIFTY-50 index on 51% days.

During the last three months DRREDDY delivered losses on 51% days. However, it still managed to end this period in a profit. It's best return during this period (of +6.49%) was on Wednesday, 21 Nov, 2018. While it's worst loss in the same period (of -4.78%) was on Wednesday, 12 Dec, 2018. The longest stort-term trend during this period was 6 profitable days, which started on 12 Nov, 2018 and went on till 19 Nov, 2018. This bullish trend returned +5.25% to investors.

During the last year DRREDDY had 6 profitable months and 6 loss making months. DRREDDY returned profits in more months than NIFTY-50 index. DRREDDY significantly outperformed NIFTY-50 index in Aug 2018, when it returned +17.12% compared to +6.56% returned by NIFTY-50 index during it's best month in the last one year - Jul 2018. DRREDDY 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 +27.09%.

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DRREDDY is currently seeing overall fall in volatility. In comparison, the NIFTY-50 index is seeing decrease in volatility. During the last three months, there was a significant fall in DRREDDY's volatility from 1 Nov, 2018 to 18 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 DRREDDY has significant positive skewness in it's return distribution. This indicates that investors can expect DRREDDY to recover from drawdowns quickly. Which makes DRREDDY a good candidate for investing on short-term bullish trends or even counter-trends hoping for a pull-back.

Investors trading in DRREDDY derivatives at this moment can consider 'Married Call' options strategy to receive better risk-adjusted returns.

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

Based on your interest in DRREDDY you may find it interesting to know that IGARASHI is a small cap that has shown remarkable performance and deserves to be on every investors' watchlist.

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