Correlation Between Paramount Communications and ADF Foods
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By analyzing existing cross correlation between Paramount Communications Limited and ADF Foods Limited, you can compare the effects of market volatilities on Paramount Communications 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 Paramount Communications with a short position of ADF Foods. Check out your portfolio center. Please also check ongoing floating volatility patterns of Paramount Communications and ADF Foods.
Diversification Opportunities for Paramount Communications and ADF Foods
-0.59 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Paramount and ADF is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Paramount Communications Limit 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 Paramount Communications 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 Paramount Communications 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 Paramount Communications i.e., Paramount Communications and ADF Foods go up and down completely randomly.
Pair Corralation between Paramount Communications and ADF Foods
Assuming the 90 days trading horizon Paramount Communications Limited is expected to under-perform the ADF Foods. But the stock apears to be less risky and, when comparing its historical volatility, Paramount Communications Limited is 1.16 times less risky than ADF Foods. The stock trades about -0.04 of its potential returns per unit of risk. The ADF Foods Limited is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 19,092 in ADF Foods Limited on September 3, 2024 and sell it today you would earn a total of 14,173 from holding ADF Foods Limited or generate 74.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Paramount Communications Limit vs. ADF Foods Limited
Performance |
| Timeline |
| Paramount Communications |
| ADF Foods Limited |
Paramount Communications and ADF Foods Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Paramount Communications and ADF Foods
The main advantage of trading using opposite Paramount Communications and ADF Foods positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Paramount Communications 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 Paramount Communications 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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Check out your portfolio center.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 Anywhere module to track or share privately all of your investments from the convenience of any device.
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