Correlation Between ADF Foods and Lakshmi Finance

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

Diversification Opportunities for ADF Foods and Lakshmi Finance

-0.36

Correlation Coefficient

ADF Foods  Lakshmi Finance

Very good diversification

The 3 months correlation between ADF and Lakshmi is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Lakshmi Finance Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakshmi Finance Indu 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 Lakshmi Finance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakshmi Finance Indu has no effect on the direction of ADF Foods i.e., ADF Foods and Lakshmi Finance go up and down completely randomly.

Pair Corralation between ADF Foods and Lakshmi Finance

Assuming the 90 days trading horizon ADF Foods Limited is expected to under-perform the Lakshmi Finance. In addition to that, ADF Foods is 2.4 times more volatile than Lakshmi Finance Industrial. It trades about -0.25 of its total potential returns per unit of risk. Lakshmi Finance Industrial is currently generating about -0.19 per unit of volatility. If you would invest  24,763  in Lakshmi Finance Industrial on October 5, 2024 and sell it today you would lose (1,067) from holding Lakshmi Finance Industrial or give up 4.31% of portfolio value over 90 days.

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

ADF Foods Limited  vs.  Lakshmi Finance Industrial

ADF Foods Limited

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, ADF Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Lakshmi Finance Indu

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lakshmi Finance Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with ADF Foods and Lakshmi Finance

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

The idea behind ADF Foods Limited and Lakshmi Finance Industrial 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.