Correlation Between ADF Foods and ZF Commercial

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

Diversification Opportunities for ADF Foods and ZF Commercial

-0.2

Correlation Coefficient

ADF Foods  ZF Commercial

Good diversification

The 3 months correlation between ADF and ZFCVINDIA is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and ZF Commercial Vehicle in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ZF Commercial Vehicle 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 ZF Commercial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ZF Commercial Vehicle has no effect on the direction of ADF Foods i.e., ADF Foods and ZF Commercial go up and down completely randomly.

Pair Corralation between ADF Foods and ZF Commercial

Assuming the 90 days trading horizon ADF Foods Limited is expected to under-perform the ZF Commercial. In addition to that, ADF Foods is 2.44 times more volatile than ZF Commercial Vehicle. It trades about -0.27 of its total potential returns per unit of risk. ZF Commercial Vehicle is currently generating about -0.14 per unit of volatility. If you would invest  1,165,570  in ZF Commercial Vehicle on October 22, 2024 and sell it today you would lose (38,275) from holding ZF Commercial Vehicle or give up 3.28% 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.  ZF Commercial Vehicle

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 rather sound basic indicators, ADF Foods is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ZF Commercial Vehicle

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ZF Commercial Vehicle has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with ADF Foods and ZF Commercial

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

The idea behind ADF Foods Limited and ZF Commercial Vehicle 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.