Correlation Between ADF Foods and Apollo Hospitals

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

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

Diversification Opportunities for ADF Foods and Apollo Hospitals

0.49

Correlation Coefficient

ADF Foods  Apollo Hospitals

Very weak diversification

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

Pair Corralation between ADF Foods and Apollo Hospitals

Assuming the 90 days trading horizon ADF Foods Limited is expected to generate 1.71 times more return on investment than Apollo Hospitals. However, ADF Foods is 1.71 times more volatile than Apollo Hospitals Enterprise. It trades about 0.01 of its potential returns per unit of risk. Apollo Hospitals Enterprise is currently generating about 0.01 per unit of risk. If you would invest  27,026  in ADF Foods Limited on October 25, 2024 and sell it today you would lose (11.00) from holding ADF Foods Limited or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.39%
Values	Daily Returns

ADF Foods Limited  vs.  Apollo Hospitals Enterprise

ADF Foods Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ADF Foods is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Apollo Hospitals Ent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apollo Hospitals Enterprise has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Apollo Hospitals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with ADF Foods and Apollo Hospitals

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

The idea behind ADF Foods Limited and Apollo Hospitals Enterprise 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.