Correlation Between Agro Tech and ADF Foods

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

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

Diversification Opportunities for Agro Tech and ADF Foods

0.49

Correlation Coefficient

Agro Tech  ADF Foods

Very weak diversification

The 3 months correlation between Agro and ADF is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Agro Tech Foods and ADF Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADF Foods Limited and Agro 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 Agro Tech Foods are associated (or correlated) with ADF Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADF Foods Limited has no effect on the direction of Agro Tech i.e., Agro Tech and ADF Foods go up and down completely randomly.

Pair Corralation between Agro Tech and ADF Foods

Assuming the 90 days trading horizon Agro Tech is expected to generate 119.62 times less return on investment than ADF Foods. In addition to that, Agro Tech is 1.45 times more volatile than ADF Foods Limited. It trades about 0.0 of its total potential returns per unit of risk. ADF Foods Limited is currently generating about 0.27 per unit of volatility. If you would invest  29,471  in ADF Foods Limited on September 3, 2024 and sell it today you would earn a total of  3,794  from holding ADF Foods Limited or generate 12.87% return on investment over 90 days.

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

Agro Tech Foods  vs.  ADF Foods Limited

Agro Tech Foods

Risk-Adjusted Performance

5 of 100

Modest

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

ADF Foods Limited

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ADF Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Agro Tech and ADF Foods

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

The idea behind Agro Tech Foods and ADF Foods 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.