Correlation Between Refex Industries and IDBI Bank

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

Diversification Opportunities for Refex Industries and IDBI Bank

-0.59

Correlation Coefficient

Refex Industries  IDBI Bank

Excellent diversification

The 3 months correlation between Refex and IDBI is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and IDBI Bank Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IDBI Bank 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 IDBI Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IDBI Bank Limited has no effect on the direction of Refex Industries i.e., Refex Industries and IDBI Bank go up and down completely randomly.

Pair Corralation between Refex Industries and IDBI Bank

Assuming the 90 days trading horizon Refex Industries Limited is expected to generate 1.69 times more return on investment than IDBI Bank. However, Refex Industries is 1.69 times more volatile than IDBI Bank Limited. It trades about 0.19 of its potential returns per unit of risk. IDBI Bank Limited is currently generating about -0.09 per unit of risk. If you would invest  32,140  in Refex Industries Limited on August 31, 2024 and sell it today you would earn a total of  17,280  from holding Refex Industries Limited or generate 53.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Refex Industries Limited  vs.  IDBI Bank Limited

Refex Industries

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent technical and fundamental indicators, Refex Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

IDBI Bank Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days IDBI Bank Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Refex Industries and IDBI Bank

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

The idea behind Refex Industries Limited and IDBI Bank 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.