Correlation Between Refex Industries and ILFS Investment

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

Diversification Opportunities for Refex Industries and ILFS Investment

0.55

Correlation Coefficient

Refex Industries  ILFS Investment

Very weak diversification

The 3 months correlation between Refex and ILFS is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and ILFS Investment Managers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ILFS Investment Managers 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 ILFS Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ILFS Investment Managers has no effect on the direction of Refex Industries i.e., Refex Industries and ILFS Investment go up and down completely randomly.

Pair Corralation between Refex Industries and ILFS Investment

Assuming the 90 days trading horizon Refex Industries Limited is expected to generate 0.64 times more return on investment than ILFS Investment. However, Refex Industries Limited is 1.57 times less risky than ILFS Investment. It trades about -0.44 of its potential returns per unit of risk. ILFS Investment Managers is currently generating about -0.33 per unit of risk. If you would invest  54,600  in Refex Industries Limited on October 8, 2024 and sell it today you would lose (5,780) from holding Refex Industries Limited or give up 10.59% of portfolio value over 90 days.

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

Refex Industries Limited  vs.  ILFS Investment Managers

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 latest stock price disarray, may contribute to short-term losses for the investors.

ILFS Investment Managers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ILFS Investment Managers has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, ILFS Investment is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Refex Industries and ILFS Investment

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

The idea behind Refex Industries Limited and ILFS Investment Managers 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.