Correlation Between Refex Industries and VIP Clothing

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

Diversification Opportunities for Refex Industries and VIP Clothing

0.5

Correlation Coefficient

Refex Industries  VIP Clothing

Very weak diversification

The 3 months correlation between Refex and VIP is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and VIP Clothing Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VIP Clothing 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 VIP Clothing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VIP Clothing Limited has no effect on the direction of Refex Industries i.e., Refex Industries and VIP Clothing go up and down completely randomly.

Pair Corralation between Refex Industries and VIP Clothing

Assuming the 90 days trading horizon Refex Industries Limited is expected to under-perform the VIP Clothing. But the stock apears to be less risky and, when comparing its historical volatility, Refex Industries Limited is 2.26 times less risky than VIP Clothing. The stock trades about -0.44 of its potential returns per unit of risk. The VIP Clothing Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  4,767  in VIP Clothing Limited on October 8, 2024 and sell it today you would lose (88.00) from holding VIP Clothing Limited or give up 1.85% 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.  VIP Clothing 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 current stock price disarray, may contribute to short-term losses for the investors.

VIP Clothing Limited

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VIP Clothing Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical indicators, VIP Clothing may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Refex Industries and VIP Clothing

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

The idea behind Refex Industries Limited and VIP Clothing 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.