Correlation Between Hathway Cable and ADF Foods

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

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

Diversification Opportunities for Hathway Cable and ADF Foods

0.94

Correlation Coefficient

Hathway Cable  ADF Foods

Almost no diversification

The 3 months correlation between Hathway and ADF is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Hathway Cable Datacom 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 Hathway Cable 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 Hathway Cable Datacom 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 Hathway Cable i.e., Hathway Cable and ADF Foods go up and down completely randomly.

Pair Corralation between Hathway Cable and ADF Foods

Assuming the 90 days trading horizon Hathway Cable Datacom is expected to generate 0.71 times more return on investment than ADF Foods. However, Hathway Cable Datacom is 1.4 times less risky than ADF Foods. It trades about -0.06 of its potential returns per unit of risk. ADF Foods Limited is currently generating about -0.07 per unit of risk. If you would invest  1,531  in Hathway Cable Datacom on December 25, 2024 and sell it today you would lose (137.00) from holding Hathway Cable Datacom or give up 8.95% of portfolio value over 90 days.

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

Hathway Cable Datacom  vs.  ADF Foods Limited

Hathway Cable Datacom

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hathway Cable Datacom has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 Hathway Cable and ADF Foods

The main advantage of trading using opposite Hathway Cable and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hathway Cable 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 Hathway Cable Datacom 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.