Correlation Between ADF Foods and Oracle Financial

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

Diversification Opportunities for ADF Foods and Oracle Financial

0.91

Correlation Coefficient

ADF Foods  Oracle Financial

Almost no diversification

The 3 months correlation between ADF and Oracle is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Oracle Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oracle Financial Services 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 Oracle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oracle Financial Services has no effect on the direction of ADF Foods i.e., ADF Foods and Oracle Financial go up and down completely randomly.

Pair Corralation between ADF Foods and Oracle Financial

Assuming the 90 days trading horizon ADF Foods Limited is expected to generate 1.46 times more return on investment than Oracle Financial. However, ADF Foods is 1.46 times more volatile than Oracle Financial Services. It trades about -0.08 of its potential returns per unit of risk. Oracle Financial Services is currently generating about -0.36 per unit of risk. If you would invest  28,495  in ADF Foods Limited on December 29, 2024 and sell it today you would lose (4,957) from holding ADF Foods Limited or give up 17.4% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.41%
Values	Daily Returns

ADF Foods Limited  vs.  Oracle Financial Services

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 weak 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.

Oracle Financial Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oracle Financial Services 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 comparatively stable which may send shares a bit higher in April 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 Oracle Financial

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

The idea behind ADF Foods Limited and Oracle Financial Services 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.