Correlation Between Refex Industries and Consolidated Construction

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

Diversification Opportunities for Refex Industries and Consolidated Construction

0.78

Correlation Coefficient

Refex Industries  Consolidated Construction

Poor diversification

The 3 months correlation between Refex and Consolidated is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Refex Industries Limited and Consolidated Construction Cons in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Consolidated Construction 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 Consolidated Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Consolidated Construction has no effect on the direction of Refex Industries i.e., Refex Industries and Consolidated Construction go up and down completely randomly.

Pair Corralation between Refex Industries and Consolidated Construction

Assuming the 90 days trading horizon Refex Industries is expected to generate 1.27 times less return on investment than Consolidated Construction. But when comparing it to its historical volatility, Refex Industries Limited is 1.05 times less risky than Consolidated Construction. It trades about 0.18 of its potential returns per unit of risk. Consolidated Construction Consortium is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,201  in Consolidated Construction Consortium on September 4, 2024 and sell it today you would earn a total of  699.00  from holding Consolidated Construction Consortium or generate 58.2% return on investment over 90 days.

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

Refex Industries Limited  vs.  Consolidated Construction Cons

Refex Industries

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 14 (%) 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.

Consolidated Construction

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Construction Consortium are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Consolidated Construction unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Refex Industries and Consolidated Construction

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

The idea behind Refex Industries Limited and Consolidated Construction Consortium 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.