Correlation Between Refex Industries and Speciality Restaurants

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

Diversification Opportunities for Refex Industries and Speciality Restaurants

0.29

Correlation Coefficient

Refex Industries  Speciality Restaurants

Modest diversification

The 3 months correlation between Refex and Speciality is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and Speciality Restaurants Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Speciality Restaurants 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 Speciality Restaurants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Speciality Restaurants has no effect on the direction of Refex Industries i.e., Refex Industries and Speciality Restaurants go up and down completely randomly.

Pair Corralation between Refex Industries and Speciality Restaurants

Assuming the 90 days trading horizon Refex Industries Limited is expected to generate 1.4 times more return on investment than Speciality Restaurants. However, Refex Industries is 1.4 times more volatile than Speciality Restaurants Limited. It trades about -0.01 of its potential returns per unit of risk. Speciality Restaurants Limited is currently generating about -0.1 per unit of risk. If you would invest  46,275  in Refex Industries Limited on October 25, 2024 and sell it today you would lose (1,570) from holding Refex Industries Limited or give up 3.39% of portfolio value over 90 days.

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

Refex Industries Limited  vs.  Speciality Restaurants Limited

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.

Speciality Restaurants

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Speciality Restaurants Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Refex Industries and Speciality Restaurants

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

The idea behind Refex Industries Limited and Speciality Restaurants 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.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.