Correlation Between UTI Asset and ADF Foods

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

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

Diversification Opportunities for UTI Asset and ADF Foods

0.58

Correlation Coefficient

UTI Asset  ADF Foods

Very weak diversification

The 3 months correlation between UTI and ADF is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding UTI Asset 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 UTI Asset 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 UTI Asset 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 UTI Asset i.e., UTI Asset and ADF Foods go up and down completely randomly.

Pair Corralation between UTI Asset and ADF Foods

Assuming the 90 days trading horizon UTI Asset Management is expected to generate 0.74 times more return on investment than ADF Foods. However, UTI Asset Management is 1.36 times less risky than ADF Foods. It trades about 0.1 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  82,405  in UTI Asset Management on October 25, 2024 and sell it today you would earn a total of  40,610  from holding UTI Asset Management or generate 49.28% return on investment over 90 days.

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

UTI Asset Management  vs.  ADF Foods Limited

UTI Asset Management

Risk-Adjusted Performance

4 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in UTI Asset Management are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, UTI Asset may actually be approaching a critical reversion point that can send shares even higher in February 2025.

ADF Foods Limited

Risk-Adjusted Performance

1 of 100

Very 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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with UTI Asset and ADF Foods

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

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.