Correlation Between ADF Foods and Hindustan Foods

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

Diversification Opportunities for ADF Foods and Hindustan Foods

-0.12

Correlation Coefficient

ADF Foods  Hindustan Foods

Good diversification

The 3 months correlation between ADF and Hindustan is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Hindustan Foods Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hindustan Foods 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 Hindustan Foods. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hindustan Foods has no effect on the direction of ADF Foods i.e., ADF Foods and Hindustan Foods go up and down completely randomly.

Pair Corralation between ADF Foods and Hindustan Foods

Assuming the 90 days trading horizon ADF Foods Limited is expected to under-perform the Hindustan Foods. In addition to that, ADF Foods is 1.29 times more volatile than Hindustan Foods Limited. It trades about -0.12 of its total potential returns per unit of risk. Hindustan Foods Limited is currently generating about 0.06 per unit of volatility. If you would invest  51,505  in Hindustan Foods Limited on December 27, 2024 and sell it today you would earn a total of  3,655  from holding Hindustan Foods Limited or generate 7.1% return on investment over 90 days.

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

ADF Foods Limited  vs.  Hindustan Foods Limited

ADF Foods Limited

Risk-Adjusted Performance

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 uncertain performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hindustan Foods

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hindustan Foods Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain technical and fundamental indicators, Hindustan Foods may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with ADF Foods and Hindustan Foods

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

The idea behind ADF Foods Limited and Hindustan 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..