Correlation Between ADF Foods and AAA Technologies

Can any of the company-specific risk be diversified away by investing in both ADF Foods and AAA Technologies 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 AAA Technologies 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 AAA Technologies Limited, you can compare the effects of market volatilities on ADF Foods and AAA Technologies 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 AAA Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of ADF Foods and AAA Technologies.

Diversification Opportunities for ADF Foods and AAA Technologies

0.58

Correlation Coefficient

ADF Foods  AAA Technologies

Very weak diversification

The 3 months correlation between ADF and AAA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding ADF Foods Limited and AAA Technologies Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AAA Technologies 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 AAA Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AAA Technologies has no effect on the direction of ADF Foods i.e., ADF Foods and AAA Technologies go up and down completely randomly.

Pair Corralation between ADF Foods and AAA Technologies

Assuming the 90 days trading horizon ADF Foods Limited is expected to generate 1.32 times more return on investment than AAA Technologies. However, ADF Foods is 1.32 times more volatile than AAA Technologies Limited. It trades about 0.09 of its potential returns per unit of risk. AAA Technologies Limited is currently generating about 0.12 per unit of risk. If you would invest  23,197  in ADF Foods Limited on April 23, 2025 and sell it today you would earn a total of  3,768  from holding ADF Foods Limited or generate 16.24% return on investment over 90 days.

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

ADF Foods Limited  vs.  AAA Technologies Limited

ADF Foods Limited

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ADF Foods Limited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, ADF Foods exhibited solid returns over the last few months and may actually be approaching a breakup point.

AAA Technologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AAA Technologies Limited are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady technical and fundamental indicators, AAA Technologies demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADF Foods and AAA Technologies

The main advantage of trading using opposite ADF Foods and AAA Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ADF Foods position performs unexpectedly, AAA Technologies 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 AAA Technologies will offset losses from the drop in AAA Technologies' long position.

The idea behind ADF Foods Limited and AAA Technologies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.