Correlation Between Diligent Media and ADF Foods

Can any of the company-specific risk be diversified away by investing in both Diligent Media and ADF Foods 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 Diligent Media and ADF Foods into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Diligent Media and ADF Foods Limited, you can compare the effects of market volatilities on Diligent Media and ADF Foods 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 Diligent Media with a short position of ADF Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Diligent Media and ADF Foods.

Diversification Opportunities for Diligent Media and ADF Foods

0.05

Correlation Coefficient

Diligent Media  ADF Foods

Significant diversification

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

Pair Corralation between Diligent Media and ADF Foods

Assuming the 90 days trading horizon Diligent Media is expected to generate 1.09 times more return on investment than ADF Foods. However, Diligent Media is 1.09 times more volatile than ADF Foods Limited. It trades about 0.06 of its potential returns per unit of risk. ADF Foods Limited is currently generating about 0.05 per unit of risk. If you would invest  265.00  in Diligent Media on December 2, 2024 and sell it today you would earn a total of  258.00  from holding Diligent Media or generate 97.36% return on investment over 90 days.

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

Diligent Media  vs.  ADF Foods Limited

Diligent Media

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Diligent Media are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting fundamental indicators, Diligent Media may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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 inconsistent 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.

Pair Trading with Diligent Media and ADF Foods

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

The idea behind Diligent Media and ADF Foods 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.