Correlation Between Viceroy Hotels and ADF Foods

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

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

Diversification Opportunities for Viceroy Hotels and ADF Foods

-0.43

Correlation Coefficient

Viceroy Hotels  ADF Foods

Very good diversification

The 3 months correlation between Viceroy and ADF is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Viceroy Hotels Limited 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 Viceroy Hotels 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 Viceroy Hotels Limited 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 Viceroy Hotels i.e., Viceroy Hotels and ADF Foods go up and down completely randomly.

Pair Corralation between Viceroy Hotels and ADF Foods

Assuming the 90 days trading horizon Viceroy Hotels Limited is expected to generate 1.68 times more return on investment than ADF Foods. However, Viceroy Hotels is 1.68 times more volatile than ADF Foods Limited. It trades about 0.05 of its potential returns per unit of risk. ADF Foods Limited is currently generating about 0.06 per unit of risk. If you would invest  190.00  in Viceroy Hotels Limited on September 26, 2024 and sell it today you would earn a total of  11,798  from holding Viceroy Hotels Limited or generate 6209.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.38%
Values	Daily Returns

Viceroy Hotels Limited  vs.  ADF Foods Limited

Viceroy Hotels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viceroy Hotels Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's essential indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

ADF Foods Limited

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, ADF Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Viceroy Hotels and ADF Foods

The main advantage of trading using opposite Viceroy Hotels and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Viceroy Hotels 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 Viceroy Hotels Limited 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.