Correlation Between Refex Industries and Parag Milk

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

Diversification Opportunities for Refex Industries and Parag Milk

0.83

Correlation Coefficient

Refex Industries  Parag Milk

Very poor diversification

The 3 months correlation between Refex and Parag is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and Parag Milk Foods in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Parag Milk Foods 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 Parag Milk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Parag Milk Foods has no effect on the direction of Refex Industries i.e., Refex Industries and Parag Milk go up and down completely randomly.

Pair Corralation between Refex Industries and Parag Milk

Assuming the 90 days trading horizon Refex Industries Limited is expected to generate 1.15 times more return on investment than Parag Milk. However, Refex Industries is 1.15 times more volatile than Parag Milk Foods. It trades about -0.13 of its potential returns per unit of risk. Parag Milk Foods is currently generating about -0.19 per unit of risk. If you would invest  51,890  in Refex Industries Limited on November 29, 2024 and sell it today you would lose (11,225) from holding Refex Industries Limited or give up 21.63% of portfolio value over 90 days.

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

Refex Industries Limited  vs.  Parag Milk Foods

Refex Industries

Risk-Adjusted Performance

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 unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Parag Milk Foods

Risk-Adjusted Performance

Very Weak

Over the last 90 days Parag Milk Foods has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Refex Industries and Parag Milk

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

The idea behind Refex Industries Limited and Parag Milk Foods 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.