Correlation Between UltraTech Cement and Refex Industries

Can any of the company-specific risk be diversified away by investing in both UltraTech Cement and Refex Industries 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 UltraTech Cement and Refex Industries into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between UltraTech Cement Limited and Refex Industries Limited, you can compare the effects of market volatilities on UltraTech Cement and Refex Industries 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 UltraTech Cement with a short position of Refex Industries. Check out your portfolio center. Please also check ongoing floating volatility patterns of UltraTech Cement and Refex Industries.

Diversification Opportunities for UltraTech Cement and Refex Industries

0.68

Correlation Coefficient

UltraTech Cement  Refex Industries

Poor diversification

The 3 months correlation between UltraTech and Refex is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding UltraTech Cement Limited and Refex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refex Industries and UltraTech Cement 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 UltraTech Cement Limited are associated (or correlated) with Refex Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Refex Industries has no effect on the direction of UltraTech Cement i.e., UltraTech Cement and Refex Industries go up and down completely randomly.

Pair Corralation between UltraTech Cement and Refex Industries

Assuming the 90 days trading horizon UltraTech Cement Limited is expected to under-perform the Refex Industries. But the stock apears to be less risky and, when comparing its historical volatility, UltraTech Cement Limited is 1.72 times less risky than Refex Industries. The stock trades about -0.03 of its potential returns per unit of risk. The Refex Industries Limited is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  47,555  in Refex Industries Limited on October 24, 2024 and sell it today you would lose (1,955) from holding Refex Industries Limited or give up 4.11% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.39%
Values	Daily Returns

UltraTech Cement Limited  vs.  Refex Industries Limited

UltraTech Cement

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UltraTech Cement Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, UltraTech Cement is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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.

Pair Trading with UltraTech Cement and Refex Industries

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

The idea behind UltraTech Cement Limited and Refex Industries 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.