Correlation Between ADF Foods and Vodafone Idea

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Can any of the company-specific risk be diversified away by investing in both ADF Foods and Vodafone Idea 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 ADF Foods and Vodafone Idea into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ADF Foods Limited and Vodafone Idea Limited, you can compare the effects of market volatilities on ADF Foods and Vodafone Idea 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 ADF Foods with a short position of Vodafone Idea. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF Foods and Vodafone Idea.

Diversification Opportunities for ADF Foods and Vodafone Idea

-0.47
  Correlation Coefficient

Very good diversification

The 3 months correlation between ADF and Vodafone is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and Vodafone Idea Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vodafone Idea Limited and ADF Foods 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 ADF Foods Limited are associated (or correlated) with Vodafone Idea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vodafone Idea Limited has no effect on the direction of ADF Foods i.e., ADF Foods and Vodafone Idea go up and down completely randomly.

Pair Corralation between ADF Foods and Vodafone Idea

Assuming the 90 days trading horizon ADF Foods Limited is expected to generate 0.6 times more return on investment than Vodafone Idea. However, ADF Foods Limited is 1.66 times less risky than Vodafone Idea. It trades about 0.38 of its potential returns per unit of risk. Vodafone Idea Limited is currently generating about 0.15 per unit of risk. If you would invest  29,215  in ADF Foods Limited on September 18, 2024 and sell it today you would earn a total of  5,305  from holding ADF Foods Limited or generate 18.16% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

ADF Foods Limited  vs.  Vodafone Idea Limited

 Performance 
       Timeline  
ADF Foods Limited 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, ADF Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.
Vodafone Idea Limited 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Vodafone Idea Limited has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

ADF Foods and Vodafone Idea Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ADF Foods and Vodafone Idea

The main advantage of trading using opposite ADF Foods and Vodafone Idea positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF Foods position performs unexpectedly, Vodafone Idea 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 Vodafone Idea will offset losses from the drop in Vodafone Idea's long position.
The idea behind ADF Foods Limited and Vodafone Idea 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.

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