Correlation Between Refex Industries and Motisons Jewellers

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

Diversification Opportunities for Refex Industries and Motisons Jewellers

0.26

Correlation Coefficient

Refex Industries  Motisons Jewellers

Modest diversification

The 3 months correlation between Refex and Motisons is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and Motisons Jewellers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Motisons Jewellers 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 Motisons Jewellers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Motisons Jewellers has no effect on the direction of Refex Industries i.e., Refex Industries and Motisons Jewellers go up and down completely randomly.

Pair Corralation between Refex Industries and Motisons Jewellers

Assuming the 90 days trading horizon Refex Industries Limited is expected to under-perform the Motisons Jewellers. But the stock apears to be less risky and, when comparing its historical volatility, Refex Industries Limited is 1.18 times less risky than Motisons Jewellers. The stock trades about -0.09 of its potential returns per unit of risk. The Motisons Jewellers is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  2,663  in Motisons Jewellers on October 23, 2024 and sell it today you would lose (103.00) from holding Motisons Jewellers or give up 3.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Refex Industries Limited  vs.  Motisons Jewellers

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

Motisons Jewellers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Refex Industries and Motisons Jewellers

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

The idea behind Refex Industries Limited and Motisons Jewellers 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.