Correlation Between ADF Foods and UTI Asset

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

Diversification Opportunities for ADF Foods and UTI Asset

0.47

Correlation Coefficient

ADF Foods  UTI Asset

Very weak diversification

The 3 months correlation between ADF and UTI is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and UTI Asset Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UTI Asset Management 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 UTI Asset. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UTI Asset Management has no effect on the direction of ADF Foods i.e., ADF Foods and UTI Asset go up and down completely randomly.

Pair Corralation between ADF Foods and UTI Asset

Assuming the 90 days trading horizon ADF Foods Limited is expected to generate 13.86 times more return on investment than UTI Asset. However, ADF Foods is 13.86 times more volatile than UTI Asset Management. It trades about 0.06 of its potential returns per unit of risk. UTI Asset Management is currently generating about 0.06 per unit of risk. If you would invest  14,705  in ADF Foods Limited on October 12, 2024 and sell it today you would earn a total of  12,960  from holding ADF Foods Limited or generate 88.13% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.59%
Values	Daily Returns

ADF Foods Limited  vs.  UTI Asset Management

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 latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

UTI Asset Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UTI Asset Management has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, UTI Asset is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ADF Foods and UTI Asset

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

The idea behind ADF Foods Limited and UTI Asset Management 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.