Correlation Between ADF Foods and Jindal Stainless

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

Diversification Opportunities for ADF Foods and Jindal Stainless

-0.05

Correlation Coefficient

ADF Foods  Jindal Stainless

Good diversification

The 3 months correlation between ADF and Jindal is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Jindal Stainless Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jindal Stainless 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 Jindal Stainless. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jindal Stainless has no effect on the direction of ADF Foods i.e., ADF Foods and Jindal Stainless go up and down completely randomly.

Pair Corralation between ADF Foods and Jindal Stainless

Assuming the 90 days trading horizon ADF Foods is expected to generate 3.48 times less return on investment than Jindal Stainless. In addition to that, ADF Foods is 1.5 times more volatile than Jindal Stainless Limited. It trades about 0.05 of its total potential returns per unit of risk. Jindal Stainless Limited is currently generating about 0.25 per unit of volatility. If you would invest  66,760  in Jindal Stainless Limited on September 26, 2024 and sell it today you would earn a total of  6,245  from holding Jindal Stainless Limited or generate 9.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

ADF Foods Limited  vs.  Jindal Stainless Limited

ADF Foods Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 6 (%) 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.

Jindal Stainless

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ADF Foods and Jindal Stainless

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

The idea behind ADF Foods Limited and Jindal Stainless 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.