Correlation Between ADF Foods and Dynamic Cables

Can any of the company-specific risk be diversified away by investing in both ADF Foods and Dynamic Cables 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 Dynamic Cables 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 Dynamic Cables Limited, you can compare the effects of market volatilities on ADF Foods and Dynamic Cables 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 Dynamic Cables. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF Foods and Dynamic Cables.

Diversification Opportunities for ADF Foods and Dynamic Cables

0.54

Correlation Coefficient

ADF Foods  Dynamic Cables

Very weak diversification

The 3 months correlation between ADF and Dynamic is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Dynamic Cables Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynamic Cables 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 Dynamic Cables. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynamic Cables has no effect on the direction of ADF Foods i.e., ADF Foods and Dynamic Cables go up and down completely randomly.

Pair Corralation between ADF Foods and Dynamic Cables

Assuming the 90 days trading horizon ADF Foods Limited is expected to under-perform the Dynamic Cables. But the stock apears to be less risky and, when comparing its historical volatility, ADF Foods Limited is 1.48 times less risky than Dynamic Cables. The stock trades about -0.21 of its potential returns per unit of risk. The Dynamic Cables Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  92,790  in Dynamic Cables Limited on October 9, 2024 and sell it today you would earn a total of  10,680  from holding Dynamic Cables Limited or generate 11.51% return on investment over 90 days.

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

ADF Foods Limited  vs.  Dynamic Cables Limited

ADF Foods Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADF Foods Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, ADF Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Dynamic Cables

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynamic Cables Limited are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Dynamic Cables unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF Foods and Dynamic Cables

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

The idea behind ADF Foods Limited and Dynamic Cables 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.