Correlation Between VA Tech and Refex Industries

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

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

Diversification Opportunities for VA Tech and Refex Industries

0.83

Correlation Coefficient

VA Tech  Refex Industries

Very poor diversification

The 3 months correlation between WABAG and Refex is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding VA Tech Wabag and Refex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refex Industries and VA Tech 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 VA Tech Wabag 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 VA Tech i.e., VA Tech and Refex Industries go up and down completely randomly.

Pair Corralation between VA Tech and Refex Industries

Assuming the 90 days trading horizon VA Tech Wabag is expected to generate 1.36 times more return on investment than Refex Industries. However, VA Tech is 1.36 times more volatile than Refex Industries Limited. It trades about -0.16 of its potential returns per unit of risk. Refex Industries Limited is currently generating about -0.21 per unit of risk. If you would invest  186,075  in VA Tech Wabag on December 4, 2024 and sell it today you would lose (59,260) from holding VA Tech Wabag or give up 31.85% of portfolio value over 90 days.

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

VA Tech Wabag  vs.  Refex Industries Limited

VA Tech Wabag

Risk-Adjusted Performance

Very Weak

Over the last 90 days VA Tech Wabag has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental drivers remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

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

Pair Trading with VA Tech and Refex Industries

The main advantage of trading using opposite VA Tech and Refex Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VA Tech 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 VA Tech Wabag 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.