Correlation Between Wipro and Refex Industries

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

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

Diversification Opportunities for Wipro and Refex Industries

0.11

Correlation Coefficient

Wipro  Refex Industries

Average diversification

The 3 months correlation between Wipro and Refex is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Wipro 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 Wipro 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 Wipro 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 Wipro i.e., Wipro and Refex Industries go up and down completely randomly.

Pair Corralation between Wipro and Refex Industries

Assuming the 90 days trading horizon Wipro Limited is expected to generate 4.05 times more return on investment than Refex Industries. However, Wipro is 4.05 times more volatile than Refex Industries Limited. It trades about 0.07 of its potential returns per unit of risk. Refex Industries Limited is currently generating about 0.17 per unit of risk. If you would invest  26,258  in Wipro Limited on September 5, 2024 and sell it today you would earn a total of  2,907  from holding Wipro Limited or generate 11.07% return on investment over 90 days.

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

Wipro Limited  vs.  Refex Industries Limited

Wipro Limited

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Wipro Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Wipro displayed solid returns over the last few months and may actually be approaching a breakup point.

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 Wipro and Refex Industries

The main advantage of trading using opposite Wipro and Refex Industries positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Wipro 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 Wipro 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.