Correlation Between Shaily Engineering and ADF Foods

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

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

Diversification Opportunities for Shaily Engineering and ADF Foods

0.56

Correlation Coefficient

Shaily Engineering  ADF Foods

Very weak diversification

The 3 months correlation between Shaily and ADF is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Shaily Engineering Plastics 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 Shaily Engineering 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 Shaily Engineering Plastics 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 Shaily Engineering i.e., Shaily Engineering and ADF Foods go up and down completely randomly.

Pair Corralation between Shaily Engineering and ADF Foods

Assuming the 90 days trading horizon Shaily Engineering Plastics is expected to generate 1.07 times more return on investment than ADF Foods. However, Shaily Engineering is 1.07 times more volatile than ADF Foods Limited. It trades about 0.25 of its potential returns per unit of risk. ADF Foods Limited is currently generating about -0.23 per unit of risk. If you would invest  135,550  in Shaily Engineering Plastics on October 11, 2024 and sell it today you would earn a total of  21,755  from holding Shaily Engineering Plastics or generate 16.05% return on investment over 90 days.

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

Shaily Engineering Plastics  vs.  ADF Foods Limited

Shaily Engineering

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Shaily Engineering Plastics are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain forward indicators, Shaily Engineering sustained solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Shaily Engineering and ADF Foods

The main advantage of trading using opposite Shaily Engineering and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Shaily Engineering 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 Shaily Engineering Plastics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.