Correlation Between Melstar Information and Refex Industries

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

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

Diversification Opportunities for Melstar Information and Refex Industries

-0.55

Correlation Coefficient

Melstar Information  Refex Industries

Excellent diversification

The 3 months correlation between Melstar and Refex is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Melstar Information Technologi and Refex Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refex Industries and Melstar Information 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 Melstar Information Technologies 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 Melstar Information i.e., Melstar Information and Refex Industries go up and down completely randomly.

Pair Corralation between Melstar Information and Refex Industries

If you would invest  39,675  in Refex Industries Limited on September 5, 2024 and sell it today you would earn a total of  16,670  from holding Refex Industries Limited or generate 42.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Melstar Information Technologi  vs.  Refex Industries Limited

Melstar Information

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Melstar Information Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Melstar Information is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Refex Industries

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Refex Industries displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Melstar Information and Refex Industries

The main advantage of trading using opposite Melstar Information and Refex Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Melstar Information 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 Melstar Information Technologies 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.