Correlation Between Sudarshan Chemical and ADF Foods

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

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

Diversification Opportunities for Sudarshan Chemical and ADF Foods

0.08

Correlation Coefficient

Sudarshan Chemical  ADF Foods

Significant diversification

The 3 months correlation between Sudarshan and ADF is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sudarshan Chemical Industries 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 Sudarshan Chemical 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 Sudarshan Chemical Industries 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 Sudarshan Chemical i.e., Sudarshan Chemical and ADF Foods go up and down completely randomly.

Pair Corralation between Sudarshan Chemical and ADF Foods

Assuming the 90 days trading horizon Sudarshan Chemical is expected to generate 2.84 times less return on investment than ADF Foods. In addition to that, Sudarshan Chemical is 1.05 times more volatile than ADF Foods Limited. It trades about 0.04 of its total potential returns per unit of risk. ADF Foods Limited is currently generating about 0.12 per unit of volatility. If you would invest  25,899  in ADF Foods Limited on September 3, 2024 and sell it today you would earn a total of  7,366  from holding ADF Foods Limited or generate 28.44% return on investment over 90 days.

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

Sudarshan Chemical Industries  vs.  ADF Foods Limited

Sudarshan Chemical

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sudarshan Chemical Industries are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical indicators, Sudarshan Chemical may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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 Sudarshan Chemical and ADF Foods

The main advantage of trading using opposite Sudarshan Chemical and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sudarshan Chemical 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 Sudarshan Chemical Industries 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.

Check out your portfolio center.

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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.