Correlation Between Lakshmi Finance and ADF Foods

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

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

Diversification Opportunities for Lakshmi Finance and ADF Foods

-0.37

Correlation Coefficient

Lakshmi Finance  ADF Foods

Very good diversification

The 3 months correlation between Lakshmi and ADF is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lakshmi Finance Industrial 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 Lakshmi Finance 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 Lakshmi Finance Industrial 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 Lakshmi Finance i.e., Lakshmi Finance and ADF Foods go up and down completely randomly.

Pair Corralation between Lakshmi Finance and ADF Foods

Assuming the 90 days trading horizon Lakshmi Finance is expected to generate 14.16 times less return on investment than ADF Foods. In addition to that, Lakshmi Finance is 1.27 times more volatile than ADF Foods Limited. It trades about 0.01 of its total potential returns per unit of risk. ADF Foods Limited is currently generating about 0.13 per unit of volatility. If you would invest  27,286  in ADF Foods Limited on September 19, 2024 and sell it today you would earn a total of  7,479  from holding ADF Foods Limited or generate 27.41% return on investment over 90 days.

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

Lakshmi Finance Industrial  vs.  ADF Foods Limited

Lakshmi Finance Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakshmi Finance Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Lakshmi Finance is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

ADF Foods Limited

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ADF Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lakshmi Finance and ADF Foods

The main advantage of trading using opposite Lakshmi Finance and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lakshmi Finance 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 Lakshmi Finance Industrial 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.