Correlation Between Life InsuranceOf and ADF Foods

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

Diversification Opportunities for Life InsuranceOf and ADF Foods

0.94
  Correlation Coefficient

Almost no diversification

The 3 months correlation between Life and ADF is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Life Insurance 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 Life InsuranceOf 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 Life Insurance 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 Life InsuranceOf i.e., Life InsuranceOf and ADF Foods go up and down completely randomly.

Pair Corralation between Life InsuranceOf and ADF Foods

Assuming the 90 days trading horizon Life InsuranceOf is expected to generate 2.25 times less return on investment than ADF Foods. But when comparing it to its historical volatility, Life Insurance is 1.64 times less risky than ADF Foods. It trades about 0.04 of its potential returns per unit of risk. ADF Foods Limited is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  14,112  in ADF Foods Limited on November 28, 2024 and sell it today you would earn a total of  9,788  from holding ADF Foods Limited or generate 69.36% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Life Insurance  vs.  ADF Foods Limited

 Performance 
       Timeline  
Life InsuranceOf 

Risk-Adjusted Performance

Very Weak

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

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
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 weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Life InsuranceOf and ADF Foods Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Life InsuranceOf and ADF Foods

The main advantage of trading using opposite Life InsuranceOf and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Life InsuranceOf 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.
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The idea behind Life Insurance 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.

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