Correlation Between Radiant Cash and ADF Foods

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

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

Diversification Opportunities for Radiant Cash and ADF Foods

0.57

Correlation Coefficient

Radiant Cash  ADF Foods

Very weak diversification

The 3 months correlation between Radiant and ADF is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Radiant Cash Management 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 Radiant Cash 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 Radiant Cash Management 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 Radiant Cash i.e., Radiant Cash and ADF Foods go up and down completely randomly.

Pair Corralation between Radiant Cash and ADF Foods

Assuming the 90 days trading horizon Radiant Cash Management is expected to under-perform the ADF Foods. But the stock apears to be less risky and, when comparing its historical volatility, Radiant Cash Management is 14.47 times less risky than ADF Foods. The stock trades about -0.02 of its potential returns per unit of risk. The ADF Foods Limited is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  14,267  in ADF Foods Limited on October 25, 2024 and sell it today you would earn a total of  12,748  from holding ADF Foods Limited or generate 89.35% return on investment over 90 days.

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

Radiant Cash Management  vs.  ADF Foods Limited

Radiant Cash Management

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Radiant Cash Management has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Radiant Cash is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

ADF Foods Limited

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ADF Foods is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Radiant Cash and ADF Foods

The main advantage of trading using opposite Radiant Cash and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Radiant Cash 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 Radiant Cash Management 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.