Correlation Between V Mart and Refex Industries

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

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

Diversification Opportunities for V Mart and Refex Industries

0.51

Correlation Coefficient

V Mart  Refex Industries

Very weak diversification

The 3 months correlation between VMART and Refex is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding V Mart Retail 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 V Mart 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 V Mart Retail 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 V Mart i.e., V Mart and Refex Industries go up and down completely randomly.

Pair Corralation between V Mart and Refex Industries

Assuming the 90 days trading horizon V Mart is expected to generate 5.05 times less return on investment than Refex Industries. But when comparing it to its historical volatility, V Mart Retail Limited is 1.31 times less risky than Refex Industries. It trades about 0.05 of its potential returns per unit of risk. Refex Industries Limited is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  32,140  in Refex Industries Limited on September 2, 2024 and sell it today you would earn a total of  19,750  from holding Refex Industries Limited or generate 61.45% return on investment over 90 days.

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

V Mart Retail Limited  vs.  Refex Industries Limited

V Mart Retail

Risk-Adjusted Performance

4 of 100

Insignificant

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

Refex Industries

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Refex Industries Limited are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very weak 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 V Mart and Refex Industries

The main advantage of trading using opposite V Mart and Refex Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if V Mart 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 V Mart Retail 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..