Correlation Between Refex Industries and EIH Associated

Can any of the company-specific risk be diversified away by investing in both Refex Industries and EIH Associated 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 EIH Associated 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 EIH Associated Hotels, you can compare the effects of market volatilities on Refex Industries and EIH Associated 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 EIH Associated. Check out your portfolio center. Please also check ongoing floating volatility patterns of Refex Industries and EIH Associated.

Diversification Opportunities for Refex Industries and EIH Associated

0.37

Correlation Coefficient

Refex Industries  EIH Associated

Weak diversification

The 3 months correlation between Refex and EIH is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and EIH Associated Hotels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EIH Associated Hotels 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 EIH Associated. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EIH Associated Hotels has no effect on the direction of Refex Industries i.e., Refex Industries and EIH Associated go up and down completely randomly.

Pair Corralation between Refex Industries and EIH Associated

Assuming the 90 days trading horizon Refex Industries Limited is expected to generate 0.47 times more return on investment than EIH Associated. However, Refex Industries Limited is 2.12 times less risky than EIH Associated. It trades about 0.14 of its potential returns per unit of risk. EIH Associated Hotels is currently generating about 0.05 per unit of risk. If you would invest  5,200  in Refex Industries Limited on October 11, 2024 and sell it today you would earn a total of  44,980  from holding Refex Industries Limited or generate 865.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Refex Industries Limited  vs.  EIH Associated Hotels

Refex Industries

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Refex Industries is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

EIH Associated Hotels

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EIH Associated Hotels are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, EIH Associated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Refex Industries and EIH Associated

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

The idea behind Refex Industries Limited and EIH Associated Hotels 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.