Correlation Between Refex Industries and Asian Hotels

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

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

Diversification Opportunities for Refex Industries and Asian Hotels

-0.02

Correlation Coefficient

Refex Industries  Asian Hotels

Good diversification

The 3 months correlation between Refex and Asian is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and Asian Hotels Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Asian Hotels Limited and Refex Industries 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 Refex Industries Limited are associated (or correlated) with Asian Hotels. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Asian Hotels Limited has no effect on the direction of Refex Industries i.e., Refex Industries and Asian Hotels go up and down completely randomly.

Pair Corralation between Refex Industries and Asian Hotels

Assuming the 90 days trading horizon Refex Industries Limited is expected to generate 1.26 times more return on investment than Asian Hotels. However, Refex Industries is 1.26 times more volatile than Asian Hotels Limited. It trades about 0.16 of its potential returns per unit of risk. Asian Hotels Limited is currently generating about 0.06 per unit of risk. If you would invest  13,784  in Refex Industries Limited on October 9, 2024 and sell it today you would earn a total of  35,106  from holding Refex Industries Limited or generate 254.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.18%
Values	Daily Returns

Refex Industries Limited  vs.  Asian Hotels Limited

Refex Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

Asian Hotels Limited

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Asian Hotels Limited are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Asian Hotels displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Refex Industries and Asian Hotels

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

The idea behind Refex Industries Limited and Asian Hotels 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.