Correlation Between Nahar Industrial and Refex Industries

Can any of the company-specific risk be diversified away by investing in both Nahar Industrial and Refex Industries 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 Nahar Industrial and Refex Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nahar Industrial Enterprises and Refex Industries Limited, you can compare the effects of market volatilities on Nahar Industrial and Refex Industries 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 Nahar Industrial with a short position of Refex Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nahar Industrial and Refex Industries.

Diversification Opportunities for Nahar Industrial and Refex Industries

0.09

Correlation Coefficient

Nahar Industrial  Refex Industries

Significant diversification

The 3 months correlation between Nahar and Refex is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Nahar Industrial Enterprises and Refex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refex Industries and Nahar Industrial 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 Nahar Industrial Enterprises are associated (or correlated) with Refex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Refex Industries has no effect on the direction of Nahar Industrial i.e., Nahar Industrial and Refex Industries go up and down completely randomly.

Pair Corralation between Nahar Industrial and Refex Industries

Assuming the 90 days trading horizon Nahar Industrial is expected to generate 6.7 times less return on investment than Refex Industries. But when comparing it to its historical volatility, Nahar Industrial Enterprises is 1.59 times less risky than Refex Industries. It trades about 0.06 of its potential returns per unit of risk. Refex Industries Limited is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  16,514  in Refex Industries Limited on September 14, 2024 and sell it today you would earn a total of  36,046  from holding Refex Industries Limited or generate 218.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nahar Industrial Enterprises  vs.  Refex Industries Limited

Nahar Industrial Ent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nahar Industrial Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Nahar Industrial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Refex Industries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal technical and fundamental indicators, Refex Industries may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nahar Industrial and Refex Industries

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

The idea behind Nahar Industrial Enterprises and Refex Industries Limited 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.