Correlation Between Newgen Software and Refex Industries

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

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

Diversification Opportunities for Newgen Software and Refex Industries

0.59

Correlation Coefficient

Newgen Software  Refex Industries

Very weak diversification

The 3 months correlation between Newgen and Refex is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Newgen Software Technologies and Refex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refex Industries and Newgen Software 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 Newgen Software Technologies 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 Newgen Software i.e., Newgen Software and Refex Industries go up and down completely randomly.

Pair Corralation between Newgen Software and Refex Industries

Assuming the 90 days trading horizon Newgen Software is expected to generate 1.3 times less return on investment than Refex Industries. In addition to that, Newgen Software is 1.68 times more volatile than Refex Industries Limited. It trades about 0.05 of its total potential returns per unit of risk. Refex Industries Limited is currently generating about 0.11 per unit of volatility. If you would invest  48,770  in Refex Industries Limited on September 13, 2024 and sell it today you would earn a total of  4,925  from holding Refex Industries Limited or generate 10.1% return on investment over 90 days.

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

Newgen Software Technologies  vs.  Refex Industries Limited

Newgen Software Tech

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Newgen Software Technologies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, Newgen Software sustained solid returns over the last few months and may actually be approaching a breakup point.

Refex Industries

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Refex Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newgen Software and Refex Industries

The main advantage of trading using opposite Newgen Software and Refex Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Newgen Software 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 Newgen Software Technologies 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.

Check out your portfolio center.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.